EX-99.1 2 v120806_ex99-1.htm Unassociated Document
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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.
 
 
(more)
 
Page 10

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
%
      

 
(more)
 
 
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
 
 
(more)
 
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
 
 
(more)
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