Cathay General Bancorp Announces Net Income of $31.9 Million, or $0.40 Per Share, For the Fourth Quarter and Net Income of $123.1 Million For the Year Ended December 31, 2013

LOS ANGELES, Jan. 23, 2014 /PRNewswire/ -- Cathay General Bancorp (the "Company", NASDAQ: CATY), the holding company for Cathay Bank, today announced results for the fourth quarter and for the year ended December 31, 2013.

FINANCIAL PERFORMANCE

FULL YEAR HIGHLIGHTS

• Diluted earnings per share increased 11.7% to $1.43 per share for the year ended 2013 compared to $1.28 per share for the year ended 2012.
• Strong growth in loans – Total loans increased $655.4 million, or 8.8%, during 2013, to $8.1 billion at December 31, 2013, compared to $7.4 billion at December 31, 2012.  
• Redemption on September 30, 2013, of the remaining $129 million of the Company's preferred stock issued under the U.S. Treasury's TARP Capital Purchase Program.

"Our loan growth for the fourth quarter was solid at $252.6 million, or a 13% annualized rate.  Continuing our goal of increasing our number of branches to better serve our customers, earlier this week, we signed an agreement to purchase the deposits of a branch located in the Richmond District of San Francisco, which will become our second branch in the City of San Francisco," commented Dunson Cheng, Chairman of the Board, Chief Executive Officer, and President of the Company.

"Our new West Covina, California branch opened on December 19, 2013 and we expect to open our new Bensonhurst, New York branch in March, 2014.  Our focus on core deposit generation resulted in core deposits increasing 10.3% during 2013," said Peter Wu, Executive Vice Chairman and Chief Operating Officer.

"During December 2013, we increased our quarterly dividend from $.01 to $.05 per share. We will continue to work to restore our dividend to historical levels," concluded Dunson Cheng.

FOURTH QUARTER INCOME STATEMENT REVIEW

Net income available to common stockholders for the quarter ended December 31, 2013, was $31.9 million, an increase of $7.7 million, or 31.8%, compared to a net income available to common stockholders of $24.2 million for the same quarter a year ago.  Diluted earnings per share available to common stockholders for the quarter ended December 31, 2013, was $0.40 compared to $0.31 for the same quarter a year ago due primarily to decreases in cost associated with debt redemption, decreases in other real estate owned ("OREO") expenses, and decreases in amortization of core deposit intangibles offset by decreases in gains on sale of securities.

Return on average stockholders' equity was 8.70% and return on average assets was 1.19% for the quarter ended December 31, 2013, compared to a return on average stockholders' equity of 6.97% and a return on average assets of 1.06% for the same quarter a year ago.

Net interest income before provision for credit losses

Net interest income before provision for credit losses increased $897,000, or 1.1%, to $82.0 million during the fourth quarter of 2013 compared to $81.1 million during the same quarter a year ago.  The increase was due primarily to the decrease in interest expense from securities sold under agreements to repurchase offset by the decrease in interest income from investment securities.

The net interest margin, on a fully taxable-equivalent basis, was 3.30% for the fourth quarter of 2013, compared to 3.35% for the third quarter of 2013, and 3.28% for the fourth quarter of 2012.  The decrease in the interest expense on securities sold under agreements to repurchase offset by decreases in earnings on investment securities contributed to the increase in the net interest margin compared to the fourth quarter of 2012.

For the fourth quarter of 2013, the yield on average interest-earning assets was 4.09%, on a fully taxable-equivalent basis, the cost of funds on average interest-bearing liabilities was 1.03%, and the cost of interest bearing deposits was 0.65%.  In comparison, for the fourth quarter of 2012, the yield on average interest-earning assets was 4.25%, on a fully taxable-equivalent basis, the cost of funds on average interest-bearing liabilities was 1.25%, and the cost of interest bearing deposits was 0.65%. 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, increased six basis points to 3.06% for the quarter ended December 31, 2013, from 3.00% for the same quarter a year ago, primarily for the reasons discussed above.

Provision for credit losses

Provision for credit losses was zero for both the fourth quarter of 2013 and the fourth quarter of 2012.  The provision for credit losses was based on the review of the adequacy of the allowance for loan losses at December 31, 2013. The provision or reversal for credit losses represents the charge against or benefit toward 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, including unfunded commitments.  The following table summarizes the charge-offs and recoveries for the periods indicated:

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 $8.3 million for the fourth quarter of 2013, a decrease of $3.9 million, or 31.6%, compared to $12.2 million for the fourth quarter of 2012. The decrease in non-interest income in the fourth quarter of 2013 was primarily due to a decrease of $4.6 million in gains on sale of securities and a decrease of $470,000 in venture capital income offset by increases of $331,000 in other miscellaneous loan fees, $242,000 in commissions from wealth management, and $230,000 in letters of credit commissions.      

Non-interest expense

Non-interest expense decreased $9.2 million, or 18.6%, to $40.3 million in the fourth quarter of 2013 compared to $49.5 million in the same quarter a year ago.  The efficiency ratio was 44.65% in the fourth quarter of 2013 compared to 53.11% for the same quarter a year ago.

Prepayment penalties decreased $5.9 million to $2,000 in the fourth quarter of 2013 compared to $5.9 million in the same quarter a year ago.  The Company did not prepay any securities sold under agreements in the fourth quarter of 2013 compared to $100.0 million in the same period a year ago.  In December 2013, the Company prepaid $50.0 million of subordinated debt.  OREO expenses decreased $2.7 million primarily due to increases in gains on sales of OREO and decreases in provision for OREO write-downs.  Amortization of core deposit premium decreased $962,000 to $436,000 in the fourth quarter of 2013 compared to $1.4 million in the same quarter a year ago as a result of the full amortization of the core deposit premium from the General Bank acquisition. 

Income taxes

The effective tax rate for the fourth quarter of 2013 was 36.0% compared to 35.1% for the fourth quarter of 2012.  The effective tax rate includes the impact of the utilization of low income housing tax credits and the recognition of other tax credits.

BALANCE SHEET REVIEW

Gross loans were $8.08 billion at December 31, 2013, an increase of $655.4 million, or 8.8%, from $7.43 billion at December 31, 2012, primarily due to increases of $254.6 million, or 6.8%, in commercial mortgage loans, increases of $209.0 million, or 18.2%, in residential mortgage loans, and increases of $171.6 million, or 8.1%, in commercial loans.  The changes in loan balances and composition from December 31, 2012, are presented below:

Total deposits were $7.98 billion at December 31, 2013, an increase of $598.1 million, or 8.1%, from $7.38 billion at December 31, 2012, primarily due to a $287.0 million, or 44.6%, increase in time deposits under $100,000, a $99.6 million, or 8.4%, increase in money market deposits, a $172.4 million, or 13.6%, increase in non-interest bearing demand deposits, a $90.7 million, or 15.3%, increase in NOW deposits,  and a $25.7 million, or 5.4%, increase in saving deposits offset by a $77.4 million, or 2.4%, decrease in time deposits of $100,000 or more.  Increases in time deposits under $100,000 were primarily due to increases in brokered time deposits.  The changes in deposit balances and composition from December 31, 2012, are presented below: 

ASSET QUALITY REVIEW

At December 31, 2013, total non-accrual loans were $83.2 million, a decrease of $20.7 million, or 19.9%, from $103.9 million at December 31, 2012.       

The allowance for loan losses was $173.9 million and the allowance for off-balance sheet unfunded credit commitments was $1.4 million at December 31, 2013, which represented the amount believed by management to be sufficient to absorb credit losses inherent in the loan portfolio, including unfunded commitments.  The allowance for credit losses, which is the sum of the allowances for loan losses and for off-balance sheet unfunded credit commitments, was $175.3 million at December 31, 2013, compared to $184.7 million at December 31, 2012, a decrease of $9.4 million, or 5.1%.  The allowance for credit losses represented 2.17% of period-end gross loans and 208.2% of non-performing loans at December 31, 2013.  The comparable ratios were 2.49% of period-end gross loans and 176.7% of non-performing loans at December 31, 2012.  The changes in the Company's non-performing assets and troubled debt restructurings at December 31, 2013, compared to December 31, 2012, and to September 30, 2013, are highlighted below:

Troubled debt restructurings on accrual status totaled $117.6 million at December 31, 2013, compared to $144.7 million at December 31, 2012.  These loans are classified as troubled debt restructurings as a result of granting a concession to borrowers.  Although these loan modifications are considered troubled debt restructurings under Accounting Standard Codification 310-40 and Accounting Standard Update 2011-02, these loans have been performing under the restructured terms and have demonstrated sustained performance under the modified terms.  The sustained performance considered by management includes the periods prior to the modification if the prior performance met or exceeded the modified terms as well as cash paid to set up interest reserves.     

The ratio of non-performing assets to total assets was 1.3% at December 31, 2013, compared to 1.4% at December 31, 2012.  Total non-performing assets decreased $13.7 million, or 9.1%, to $137.2 million at December 31, 2013, compared to $150.9 million at December 31, 2012, primarily due to a $20.7 million, or 19.9%, decrease in non-accrual loans offset by a $6.6 million, or 14.2%, increase in OREO. 

CAPITAL ADEQUACY REVIEW

At December 31, 2013, the Company's Tier 1 risk-based capital ratio of 15.03%, total risk-based capital ratio of 16.34%, and Tier 1 leverage capital ratio of 12.48%, continue to place the Company in the "well capitalized" category for regulatory purposes, 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, 2012, the Company's Tier 1 risk-based capital ratio was 17.36%, total risk-based capital ratio was 19.12%, and Tier 1 leverage capital ratio was 13.82%.

FULL YEAR REVIEW

Net income attributable to common stockholders for the year ended December 31, 2013, was $113.5 million, an increase of $12.5 million, or 12.4%, compared to net income attributable to common stockholders of $101.0 million for the year ended December 31, 2012, due primarily to increases in gains on sale of securities, decreases in OREO expenses, decreases in litigation expenses, and increases in commissions from wealth management, offset by decreases in the reversal for credit losses, increases in prepayment penalties on the prepayment of securities sold under an agreement to repurchase, increases in salaries and incentive compensation expense, increases in consulting expense, and increases in legal and collection expense.  Diluted earnings per share was $1.43 for the year ended December 31, 2013, compared to $1.28 per share for the year ended December 31, 2012.  The net interest margin for the year ended December 31, 2013, increased five basis points to 3.33% compared to 3.28% for the year ended December 31, 2012.

Return on average stockholders' equity was 8.00% and return on average assets was 1.17% for the year ended December 31, 2013, compared to a return on average stockholders' equity of 7.48% and a return on average assets of 1.11% for the year ended December 31, 2012.  The efficiency ratio for the year ended December 31, 2013, was 50.35% compared to 52.37% for the year ended December 31, 2012.

CONFERENCE CALL

Cathay General Bancorp will host a conference call this afternoon to discuss its fourth quarter 2013 financial results. The call will begin at 3:00 p.m. Pacific Time. Analysts and investors may dial in and participate in the question-and-answer session. To access the call, please dial 1-877-703-6102 and enter Participant Passcode 88064359. A listen-only live Webcast of the call will be available at www.cathaygeneralbancorp.com and a recorded version is scheduled to be available for replay for 12 months after the call.

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 32 branches in California, eight 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 Nevada, one in Hong Kong, and a representative office in Shanghai and in Taipei. Cathay Bank's website is found at http://www.cathaybank.com. Cathay General Bancorp's website is found at http://www.cathaygeneralbancorp.com.  Information set forth on such websites is not incorporated into this press release.

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 "aims," "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "projects," "predicts," "potential," "possible," "optimistic," "seeks," "shall," "should," "will," and variations of these words and similar expressions. Forward-looking statements are based on estimates, beliefs, projections, and assumptions of management and are not guarantees of future performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Such risks and uncertainties and other factors include, but are not limited to, adverse developments or conditions related to or arising from U.S. and international business and economic conditions; credit risks of lending activities and deterioration in asset or credit quality; potential supervisory action by federal supervisory authorities; increased costs of compliance and other risks associated with changes in regulation and the current regulatory environment, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), and the potential for substantial changes in the legal, regulatory, and enforcement framework and oversight applicable to financial institutions in reaction to recent adverse financial market events, including changes pursuant to the Dodd-Frank Act; potential goodwill impairment; liquidity risk; fluctuations in interest rates; inflation and deflation; risks associated with acquisitions and the expansion of our business into new markets; real estate market conditions and the value of real estate collateral; environmental liabilities; our ability to compete with larger competitors; the possibility of higher capital requirements, including implementation of the Basel III capital standards of the Basel Committee; our ability to retain key personnel; successful management of reputational risk; natural disasters and geopolitical events; general economic or business conditions in California, Asia, and other regions where Cathay Bank has operations; failures, interruptions, or security breaches of our information systems; our ability to adapt our systems to technological changes, including successfully implementing our core system conversion; adverse results in legal proceedings; changes in accounting standards or tax laws and regulations; market disruption and volatility; restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure; successfully raising additional capital, if needed, and the resulting dilution of interests of holders of our common stock; and the soundness of other financial institutions.

These and other factors are further described in Cathay General Bancorp's Annual Report on Form 10-K for the year ended December 31, 2012 (Item 1A in particular), other reports filed with the Securities and Exchange Commission ("SEC"), and other filings Cathay General Bancorp makes 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 to the date of this press release. Cathay General Bancorp has no intention and undertakes no obligation to update any forward-looking statement or to publicly announce any revision of any forward-looking statement to reflect future developments or events, except as required by law.

Cathay General Bancorp's filings with the SEC are available at the website maintained by the SEC at http://www.sec.gov, or by request directed to Cathay General Bancorp, 9650 Flair Drive, El Monte, California 91731, Attention: Investor Relations, (626) 279-3286.

SOURCE Cathay General Bancorp

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED