Note 10 - Capital Resources

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

10. Capital Resources

Total equity was

$1.83

billion at

December

31,

2016,

an increase of

$80.8

million, or

4.6%,

from

$1.75

billion at

December

31,

2015,

primarily due to increases in net income of

$175.1

million, and in other comprehensive income of

$4.7

million, proceeds from exercise of stock options of

$7.7

million, from dividend reinvestment of

$2.3

million which were offset by purchases of treasury stock of

$54.4

million and common stock cash dividends of

$59.3

million.

The Company paid cash dividends of

$0.75

per common share in

2016

and

$0.56

per common share in

2015

.

       In

August

2015,

the Company resumed stock repurchases under the

November

2007

repurchase program and repurchased the remaining

622,500

shares for

$18.1

million, or an average price of

$29.08

per share. Also, in

August

2015,

the Board of Directors approved a stock repurchase program for the Company to buy back up to

two

million shares of our common stock, and

1,366,750

shares were repurchased during

2015.

In

January

and

February

of

2016,

the Company repurchased the remaining

633,250

shares under the

August

2015

repurchase program for

$17.0

million, or an average price of

$26.82

per share.

On

February

1,

2016,

the Board of Directors approved a new stock repurchase program to buy back up to

$45.0

million of our common stock. In

2016,

the Company repurchased

1,380,578

shares for

$37.5

million, or

$27.13

per share under the

February

2016

repurchase program. As of

December

31,

2016,

the Company

may

repurchase up to

$7.5

million of its common stock under the

February

2016

repurchase program.

The U.S. Treasury received warrants to purchase common stock of

1,846,374

shares at an exercise price of

$20.96

as part of the Company’s participation in the U.S. Treasury Troubled Asset Relief Program Capital Purchase Program. As a result of the anti-dilution adjustments under the warrant, the exercise price at

December

31,

2016

has been adjusted to

$20.65

and the number of warrants increased by

1.5%.

During

2016,

930,113

warrants were exercised on a cashless basis and

388,001

common shares were issued. At

December

31,

2016,

943,345

warrants remain exercisable.

The Bancorp established

three

special purpose trusts in

2003

and

two

in

2007

for the purpose of issuing trust preferred securities to outside investors (“Capital Securities”). The trusts exist for the purpose of issuing the Capital Securities and investing the proceeds thereof, together with proceeds from the purchase of the common securities of the trusts by the Bancorp, in Junior Subordinated Notes issued by the Bancorp. Subject to some limitations, payment of distributions out of the monies held by the trusts and payments on liquidation of the trusts or the redemption of the Capital Securities are guaranteed by the Bancorp to the extent the trusts have funds on hand at such time. The obligations of the Bancorp under the guarantees and the Junior Subordinated Notes are subordinate and junior in right of payment to all indebtedness of the Bancorp and will be structurally subordinated to all liabilities and obligations of the Bancorp’s subsidiaries. The Bancorp has the right to defer payments of interest on the Junior Subordinated Notes at any time or from time to time for a period of up to

twenty

consecutive quarterly periods with respect to each deferral period. Under the terms of the Junior Subordinated Notes, the Bancorp

may

not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock if the Bancorp has deferred payment of interest on the Junior Subordinated Notes.

The

five

special purpose trusts are considered variable interest entities. Because the Bancorp is not the primary beneficiary of the trusts, the financial statements of the trusts are not included in the Consolidated Financial Statements of the Company. The Junior Subordinated Notes, all of which were issued before

May

19,

2010,

are currently included in the Tier

1

capital of the Bancorp for regulatory capital purposes. Under the Dodd-Frank Act, trust preferred securities issued before

May

19,

2010

by the Bancorp and other bank holding companies with assets of less than

$15

billion as of

December

31,

2019

continue to qualify for Tier

1

capital treatment. Interest expense, excluding impact of cash flow interest rate swaps entered into during

June

2014,

on the Junior Subordinated Notes was

$3.5

million for

2016,

$3.0

million for

2015,

and

$2.9

million for

2014.

The table below summarizes the outstanding Junior Subordinated Notes issued by the Company to each trust as of

December

31,

2016:

		Principal		Not			Current			Date of	Payable/
	Issuance	Balance of		Redeemable	Stated	Annualized	Interest			Rate	Distribution
Trust Name	Date	Notes		Until	Maturity	Coupon Rate	Rate			Change	Date
(Dollars in thousands)
Cathay Capital
Trust I	June 26,	$	20,619	June 30,	June 30,	3-month		4.15	%	December 30,	March 30
	2003			2008	2033	LIBOR				2016	June 30
						+ 3.15%					September 30
											December 30
Cathay Statutory
Trust I	September 17,		20,619	September 17,	September 17,	3-month		3.99	%	December 19,	March 17
	2003			2008	2033	LIBOR				2016	June 17
						+ 3.00%					September 17
											December 17
Cathay Capital
Trust II	December 30,		12,887	March 30,	March 30,	3-month		3.90	%	December 30,	March 30
	2003			2009	2034	LIBOR				2016	June 30
						+ 2.90%					September 30
											December 30
Cathay Capital
Trust III	March 28,		46,392	June 15,	June 15,	3-month		2.44	%	December 15,	March 15
	2007			2012	2037	LIBOR				2016	June 15
						+ 1.48%					September 15
											December 15
Cathay Capital
Trust IV	May 31,		18,619	September 6,	September 6,	3-month		2.35	%	December 6,	March 6
	2007			2012	2037	LIBOR				2016	June 6
						+ 1.4%					September 6
											December 6
Total Junior Subordinated Notes		$	119,136