Note 10 - Capital Resources

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

10. Capital Resources

Total equity was

$1.97

billion at

December 31, 2017,

an increase of

$144.8

million, or

7.9%,

from

$1.83

billion at

December 31, 2016,

primarily due to increases in net income of

$176.0

million, equity consideration for the acquisition of SinoPac Bancorp of

$34.9

million,

proceeds from dividend reinvestment of

$2.5

million, proceeds from exercise of stock options of

$1.1

million, and in other comprehensive income of

$1.2

million offset by shares withheld related to net share settlement of RSUs of

$6.8

million and common stock cash dividends of

$69.9

million.

The Company paid cash dividends of

$0.87

per common share in

2017

and

$0.75

per common share in

2016

.

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

1,846,374

shares at an exercise price of

$20.96

, which will expire on

December 5, 2018,

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, 2017,

has been adjusted to

$20.41

and the number of warrants increased by

1.03%.

At

December 31, 2017,

943

,327

warrants remain exercisable compared to

943,345

warrants at

December 31, 2016.

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, 2017,

the Company

may

repurchase up to

$7.5

million of its common stock under the

February 2016

repurchase program.

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

2

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

May 19, 2010

by bank holding companies with assets of less than

$15

billion as of

December 31, 2019

continue to qualify for Tier

1

capital treatment

.

As of

December 31, 2017,

the Company’s assets grew past the

$15

billion threshold which

no

longer qualifies the Junior Subordinated Notes as Tier

1

capital for regulatory reporting purposes. The Junior Subordinated Notes qualify as Tier

1

capital for regulatory reporting purposes at

December 31, 2016

and

2015.

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

June 2014,

on the Junior Subordinated Notes was

$4.1

million for

2017,

$3.5

million for

2016,

and

$3

.0

million for

2015.

 

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

December 31, 2017:

		Principa l		No t			Curren t			Date o f	Payable /
	Issuanc e	Balance of		Redeemabl e	Stated	Annualize d	Interes t			Rat e	Distributio n
Trust Nam e	Dat e	Note s		Unti l	Maturit y	Coupon Rat e	Rat e			Chang e	Dat e
(Dollars in thousands )
Cathay Capita l Trust I	June 26 ,	$	20,619	June 30 ,	June 30 ,	3-mont h		4.84	%	December 30 ,	March 3 0
	200 3			200 8	203 3	LIBO R				201 7	June 3 0
						+ 3.15 %					September 3 0
											December 3 0
Cathay Statutor y Trust I	September 17 ,		20,619	September 17 ,	September 17 ,	3-mont h		4.60	%	December 18 ,	March 1 7
	200 3			200 8	203 3	LIBO R				201 7	June 1 7
						+ 3.00 %					September 1 7
											December 1 7
Cathay Capita l Trust II	December 30 ,		12,887	March 30 ,	March 30 ,	3-mont h		4.59	%	December 30 ,	March 3 0
	200 3			200 9	203 4	LIBO R				201 7	June 3 0
						+ 2.90 %					September 3 0
											December 3 0
Cathay Capita l Trust III	March 28 ,		46,392	June 15 ,	June 15 ,	3-mont h		3.07	%	December 15 ,	March 1 5
	200 7			201 2	203 7	LIBO R				201 7	June 1 5
						+ 1.48 %					September 1 5
											December 1 5
Cathay Capita l Trust IV	May 31 ,		18,619	September 6 ,	September 6 ,	3-mont h		2.91	%	December 6 ,	March 6
	200 7			201 2	203 7	LIBO R				201 7	June 6
						+ 1.4 %					September 6
											December 6
Total Junior Subordinated Note s		$	119,136