Cathay General Bancorp Reports Operating Results (10-Q)

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Aug 08, 2012
Cathay General Bancorp (CATY, Financial) filed Quarterly Report for the period ended 2012-06-30.

Cathay General Bancorp has a market cap of $1.3 billion; its shares were traded at around $16.54 with a P/E ratio of 13.5 and P/S ratio of 2.6. The dividend yield of Cathay General Bancorp stocks is 0.2%.

Highlight of Business Operations:

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 $9.9 million for the second quarter of 2012, a decrease of $2.6 million, or 20.9%, compared to $12.5 million for the second quarter of 2011. The decrease in non-interest income in the second quarter of 2012 was primarily due to decreases of $2.8 million from gains on sale of securities and decreases of $923,000 in gains on sales of loans offset by a $954,000 increase in net gains on interest rate swap agreements and a $224,000 increase in letters of credit commissions.

OREO expenses increased to $7.1 million in the second quarter of 2012 compared to $2.3 million in the same quarter a year ago primarily due to increases in provisions for OREO write-down of $2.4 million, increases in OREO expenses of $1.5 million, and decreases of $938,000 in gains from sales and transfers of OREO. Salaries and employee benefits increased $2.4 million, or 13.8% in the second quarter of 2012 compared to the same quarter a year ago primarily due to increases in incentive compensation and the hiring of new employees. Marketing expense increased $666,000 primarily due to increases in media and promotion expenses, and contributions to Cathay Bank Foundation.

Net income attributable to common stockholders was $50.5 million, an increase of $12.3 million, or 32.5%, compared to net income attributable to common stockholders of $38.2 million for the same period a year ago due primarily to decreases in the provision for loan losses, decreases in prepayment penalties on the repayment of FHLB advances and securities sold under an agreement to repurchase, increases in net interest income, and decreases in FDIC assessments, which were partially offset by increases in income tax expenses, increases in OREO expenses, decreases in gains on sale of securities, and increases in salaries and incentive compensation expense. Diluted earnings per share was $0.64 compared to $0.49 per share for the same period a year ago. The net interest margin for the six months ended June 30, 2012, increased 15 basis points to 3.28% compared to 3.13% for the same period a year ago.

At June 30, 2012, recorded investment in impaired loans totaled $276.6 million and was comprised of non-accrual loans of $122.8 million, non-accrual loans held for sale of $500,000, and accruing TDR s of $153.2 million. At December 31, 2011, recorded investment in impaired loans totaled $322.0 million and was comprised of non-accrual loans of $201.2 million, non-accrual loans held for sale of $760,000, and accruing TDR s of $120.0 million. As of June 30, 2012, $97.1 million, or 79.1%, of the $122.8 million non-accrual loans were secured by real estate compared to $170.5 million, or 84.8%, of the $201.2 million of non-accrual loans that were secured by real estate at December 31, 2011. In light of declining property values in the current economic downturn affecting the real estate markets, the Bank has obtained current appraisals, sales contracts, or other available market price information which provide updated factors in evaluating potential loss.

As of June 30, 2012, and December 31, 2011, we had entered into five interest rate swap agreements with two major financial institutions in the notional amount of $300.0 million for a period of three years. These interest rate swaps were not structured to hedge against inherent interest rate risks related to our interest-earning assets and interest-bearing liabilities. At June 30, 2012, the Company paid a fixed rate at a weighted average of 1.95% and received a floating 3-month LIBOR rate at a weighted average of 0.47% on these agreements. The net amount accrued on these interest rate swaps was recorded as a reduction to other non-interest income in the amount of $287,000 for the first six months of 2012 compared to $2.5 million in the same period a year ago. At June 30, 2012, the Company recorded $742,000 within other liabilities to recognize the negative fair value of these interest rate swaps compared to the $2.6 million negative fair value at December 31, 2011.

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