Equity Incentive Plans

1998,

the Board adopted the Cathay Bancorp, Inc. Equity Incentive Plan. Under the Equity Incentive Plan, as amended in

September,

2003,

directors and eligible employees

may

be granted incentive or non-statutory stock options and/or restricted stock units, or awarded non-vested stock, for up to

7,000,000

shares of the Company’s common stock on a split adjusted basis. In

May

2005,

the stockholders of the Company approved the

2005

Incentive Plan. In

May

2015,

the stockholders of the Company approved, amendment, and restatement of the

2005

Incentive Plan which provides that

3,562,168

shares of the Company’s common stock

may

be granted as incentive or non-statutory stock options, or as restricted stock, or as restricted stock units. As of

December

31,

2016,

the only options granted by the Company under the

2005

Incentive Plan, as amended and restated, were non-statutory stock options to selected bank officers and non-employee directors at exercise prices equal to the fair market value of a share of the Company’s common stock on the date of grant. Such options have a maximum

ten

-year term and vest in

20%

annual increments (subject to early termination in certain events) except certain options granted to Mr. Dunson K. Cheng in

2005

and

2008.

If such options expire or terminate without having been exercised, any shares not purchased will again be available for future grants or awards.

There were

options granted during the

three

years ended

2016.

The Company expects to issue new shares to satisfy stock option exercises and the vesting of restricted stock units.

Cash received from exercises of stock options totaled

$7.7

million for

327,830

shares in

2016,

$5.0

million for

214,580

shares in

2015,

and

$128,000

for

5,500

shares in

2014.

Aggregate intrinsic value for options exercised was

$4.0

million in

2016

compared to

$2.0

million in

2015.

A summary of stock option activity for

2016,

2015,

and

2014

follows:

						Weighted-Average		Aggregate
				Weighted-Average		Remaining Contractual		Intrinsic
	Shares			Exercise Price		Life (in years)		Value (in thousands)
Balance, December 31, 2013		2,812,874			31.81		1.9	$	2,119
Exercised		(5,500	)	$	23.37
Forfeited		(474,470	)		29.28
Balance, December 31, 2014		2,332,904			32.34		1.2	$	1,388
Exercised		(214,580	)	$	23.37
Forfeited		(1,087,154	)		35.13
Balance, December 31, 2015		1,031,170			31.27		0.9	$	3,268
Exercised		(327,830	)	$	23.37
Forfeited		(620,670	)		36.50
Balance, December 31, 2016		82,670			23.37		1.1	$	1,211
Exercisable, December 31, 2016		82,670		$	23.37		1.1	$	1,211

December

31,

2016,

3,524,517

shares were available under the

2005

Incentive Plan for future grants.

In addition to stock options, the Company also grants restricted stock units to eligible employees which vest subject to continued employment at the vesting dates.

The Company granted restricted stock units for

88,693

shares at an average closing price of

$30.37

per share in

2016,

72,900

shares at an average closing price of

$28.11

per share in

2015,

and for

17,601

shares at an average closing price of

$24.66

per share in

2014.

The restricted stock units granted in

2014,

2013,

and

2012

are scheduled to vest

two

years from grant date. The restricted stock units granted in

2015

and

2016

are scheduled to vest

three

years from grant date.

December

2013,

the Company granted performance share unit awards in which the number of units earned is calculated based on the relative total shareholder return (“TSR”) of the Company’s common stock as compared to the TSR of the KBW Regional Banking Index. In addition, the Company granted performance share unit awards in which the number of units earned is determined by comparison to the targeted EPS as defined in the award for the

2014

2016

period. In

December

2016,

in addition to TSR and EPS awards, the Company granted performance share unit awards in which the number of units earned is determined by comparison to the targeted return of assets ROA as defined in the award for

December

2016.

Performance TSR restricted stock units for

119,840

shares and performance EPS restricted stock units for

116,186

shares were granted to

eight

executive officers in

2013.

December

2014,

the Company granted additional performance TSR restricted stock units for

60,456

shares and performance EPS restricted stock units for

57,642

shares were granted to

seven

executive officers. In

December

2015,

the Company granted additional performance TSR restricted stock units for

61,209

shares and performance EPS restricted stock units for

57,409

shares were granted to

seven

executive officers. In

December

2016,

the Company granted additional performance TSR restricted stock units for

30,319

shares, performance EPS restricted stock units for

58,241

shares, and performance ROA restricted stock units for

29,119

shares were granted to

seven

executive officers. Performance TSR, performance EPS, and performance ROA shares awarded are scheduled to vest

three

years from grant date.

The following table presents restricted stock unit activity for

2016,

2015,

and

2014:

	Units
Balance at December 31, 2013		379,458
Granted		135,699
Vested		(122,832	)
Cancelled or forfeited		(5,860	)
Balance at December 31, 2014		386,465
Granted		191,518
Vested		(26,924	)
Cancelled or forfeited		(8,684	)
Balance at December 31, 2015		542,375
Granted		206,372
Vested		(13,780	)
Cancelled or forfeited		(7,548	)
Balance at December 31, 2016		727,419

All awards are deemed probable of issuance and the compensation expense recorded for restricted stock units was

$4.4

million in

2016,

$4.5

million in

2015

, and

$3.8

million in

2014.

Unrecognized stock-based compensation expense related to restricted stock units was

$10.0

million at

December

31,

2016,

and is expected to be recognized over the next

2.4

years.

The following table summarizes the tax benefit from options exercised:

	2016		2015			2014
	(In thousands)
Short-fall of tax deductions in excess of grant-date fair value	$	-	$	(5,348	)	$	(1,285	)
Benefit of tax deductions on grant-date fair value		-		6,485			1,292
Total benefit of tax deductions	$	-	$	1,137		$	7