Cathay General Bancorp Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

caty20200630_10q.htm

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UNITED STATES

securities and exchange commission

Washington, D.C. 20549

form 10-Q

(Mark One)

☒ quarterly report pursuant to section 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2020

☐ transition report pursuant to section 13 or 15 (d) of the SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number

001-31830

CATHAY GENERAL BANCORP

(Exact name of registrant as specified in its charter)

Delaware		95-4274680
(State of other jurisdiction of incorporation		(I.R.S. Employer
or organization)		Identification No.)

777 North Broadway, Los Angeles, California		90012
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code:

(213) 625-4700

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	CATY	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $.01 par value, 79,620,001 shares outstanding as of July 31, 2020.

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CATHAY GENERAL BANCORP AND SUBSIDIARies

2^nd quarter 2020 REPORT ON FORM 10-Q

table of contents

PART I – FINANCIAL INFORMATION		3

Item 1.	FINANCIAL STATEMENTS (Unaudited)	3
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	8
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	42
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	69
Item 4.	CONTROLS AND PROCEDURES.	70

PART II – OTHER INFORMATION		70

Item 1.	LEGAL PROCEEDINGS.	70
Item 1A.	RISK FACTORS.	71
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	73
Item 3.	DEFAULTS UPON SENIOR SECURITIES.	74
Item 4.	MINE SAFETY DISCLOSURES.	74
Item 5.	OTHER INFORMATION.	74
Item 6.	EXHIBITS.	74


SIGNATURES		75

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Forward-Looking Statements

In this Quarterly Report on Form 10-Q, the term “Bancorp” refers to Cathay General Bancorp and the term “Bank” refers to Cathay Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and the Bank collectively.

The statements in this report include 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. We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements in these provisions. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including statements about anticipated future operating and financial performance, financial position and liquidity, growth opportunities and growth rates, growth plans, acquisition and divestiture opportunities, business prospects, strategic alternatives, business strategies, financial expectations, regulatory and competitive outlook, loan and deposit growth, investment and expenditure plans, financing needs and availability, level of nonperforming assets, and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as “aims,” “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “optimistic,” “plans,” “potential,” “possible,” “predicts,” “projects,” “seeks,” “shall,” “should,” “will,” and variations of these words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by us are based on estimates, beliefs, projections, and assumptions of management and are not guarantees of future performance. These forward-looking statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from our historical experience and our present expectations or projections. Such risks, uncertainties and other factors include, but are not limited to:

●

local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our operations, assets and liabilities;

●

the impact on our business, operations, financial condition, liquidity, results of operations, prospects and trading prices of our shares arising out of the COVID-19 pandemic;

●

possible additional provisions for loan losses and charge-offs;

●

credit risks of lending activities and deterioration in asset or credit quality;

●

extensive laws and regulations and supervision that we are subject to, including potential supervisory action by bank supervisory authorities;

●

increased costs of compliance and other risks associated with changes in regulation, including the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);

●

higher capital requirements from the implementation of the Basel III capital standards;

●

compliance with the Bank Secrecy Act and other money laundering statutes and regulations;

●

potential goodwill impairment;

●

liquidity risk;

●

fluctuations in interest rates;

●

risks associated with acquisitions and the expansion of our business into new markets;

●

inflation and deflation;

●

real estate market conditions and the value of real estate collateral;

●

environmental liabilities;

●

our ability to generate anticipated returns from our investments and/or financings in certain tax advantaged-projects;

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●

our ability to compete with larger competitors;

●

our ability to retain key personnel;

●

successful management of reputational risk;

●

natural disasters, public health crises (including the occurrence of a contagious disease or illness, such as the COVID-19 pandemic) and geopolitical events;

●

failures, interruptions, or security breaches of our information systems;

●

our ability to adapt our systems to the expanding use of technology in banking;

●

risk management processes and strategies;

●

adverse results in legal proceedings;

●

the impact of regulatory enforcement actions, if any;

●

certain provisions in our charter and bylaws that may affect acquisition of the Company;

●

changes in accounting standards or tax laws and regulations;

●

market disruption and volatility;

●

fluctuations in the Bancorp’s stock price;

●

restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure;

●

issuances of preferred stock;

●

capital level requirements and successfully raising additional capital, if needed, and the resulting dilution of interests of holders of our common stock; and

●

the soundness of other financial institutions.

These and other factors are further described in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2019 (Item 1A in particular), other reports and registration statements filed with the Securities and Exchange Commission (“SEC”), and other filings Bancorp makes with the SEC from time to time. Actual results in any future period may also vary from the past results discussed in this report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. We have no intention and undertake no obligation to update any forward-looking statement or to announce publicly any revision of any forward-looking statement to reflect developments, events, occurrences or circumstances after the date of such statement, except as required by law.

Bancorp’s filings with the SEC are available at the website maintained by the SEC at http://www.sec.gov, or by request directed to Cathay General Bancorp, 9650 Flair Drive, El Monte, California 91731, Attention: Investor Relations (626) 279-3296.

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (Unaudited)

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2020			December 31, 2019
	(In thousands, except share and per share data)
Assets
Cash and due from banks	$	148,700		$	177,240
Short-term investments and interest-bearing deposits		1,425,001			416,538
Securities available-for-sale (amortized cost of $1,122,994 at June 30, 2020 and $1,443,730 at December 31, 2019)		1,146,102			1,451,842
Loans		15,608,283			15,075,481
Less: Allowance for loan losses		(169,680	)		(123,224	)
Unamortized deferred loan fees, net		(4,507	)		(626	)
Loans, net		15,434,096			14,951,631
Equity securities		24,570			28,005
Federal Home Loan Bank stock		17,250			18,090
Other real estate owned, net		7,318			10,244
Affordable housing investments and alternative energy partnerships, net		320,047			308,681
Premises and equipment, net		104,165			104,239
Customers’ liability on acceptances		10,665			10,694
Accrued interest receivable		54,326			53,541
Goodwill		372,189			372,189
Other intangible assets, net		6,030			6,296
Right-of-use assets - operating leases		34,217			33,990
Other assets		162,361			150,924
Total assets	$	19,267,037		$	18,094,144

Liabilities
Deposits:
Non-interest-bearing demand deposits	$	3,298,415		$	2,871,444
Interest-bearing deposits:
NOW deposits		1,671,290			1,358,152
Money market deposits		2,982,385			2,260,764
Savings deposits		743,982			758,903
Time deposits		7,585,832			7,443,045
Total deposits		16,281,904			14,692,308
Short-term borrowings		—			25,683
Advances from the Federal Home Loan Bank		230,000			670,000
Other borrowings of affordable housing investments		32,399			29,022
Long-term debt		119,136			119,136
Deferred payments from acquisition		7,753			7,644
Acceptances outstanding		10,665			10,694
Lease liabilities - operating leases		36,408			35,873
Other liabilities		206,324			209,501
Total liabilities		16,924,589			15,799,861
Commitments and contingencies		—			—
Stockholders’ Equity
Common stock, $0.01 par value, 100,000,000 shares authorized; 90,354,947 issued and 79,619,984 outstanding at June 30, 2020, and 90,064,382 issued and 79,729,419 outstanding at December 31, 2019		903			900
Additional paid-in-capital		953,616			950,466
Accumulated other comprehensive income, net		8,353			2,302
Retained earnings		1,710,994			1,659,153
Treasury stock, at cost (10,734,963 shares at June 30, 2020, and 10,334,963 shares at December 31, 2019)		(331,418	)		(318,538	)
Total equity		2,342,448			2,294,283
Total liabilities and equity	$	19,267,037		$	18,094,144

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020			2019
	(In thousands, except share and per share data)
Interest and Dividend Income
Loans receivable, including loan fees	$	168,149	$	182,291	$	346,019		$	360,568
Investment securities		5,405		8,477		13,015			15,767
Federal Home Loan Bank stock		214		298		519			602
Deposits with banks		240		1,383		1,191			3,273
Total interest and dividend income		174,008		192,449		360,744			380,210

Interest Expense
Time deposits		30,811		39,491		65,966			73,614
Other deposits		5,919		5,588		13,910			10,965
Advances from Federal Home Loan Bank		1,316		1,725		2,868			4,315
Long-term debt		1,440		2,007		2,880			4,139
Deferred payments from acquisition		42		192		100			409
Short-term borrowings		5		67		234			73
Total interest expense		39,533		49,070		85,958			93,515

Net interest income before provision for credit losses		134,475		143,379		274,786			286,695
Provision for credit losses		25,000		—		50,000			—
Net interest income after provision for credit losses		109,475		143,379		224,786			286,695

Non-Interest Income
Net gains/(losses) from equity securities		5,779		3,237		(323	)		7,400
Securities gains, net		1,147		13		1,153			13
Letters of credit commissions		1,560		1,577		3,200			3,131
Depository service fees		1,117		1,243		2,415			2,498
Other operating income		6,003		6,724		14,947			12,673
Total non-interest income		15,606		12,794		21,392			25,715

Non-Interest Expense
Salaries and employee benefits		28,197		33,153		59,136			65,285
Occupancy expense		4,963		5,489		10,140			11,038
Computer and equipment expense		2,581		2,833		5,174			5,712
Professional services expense		5,200		6,000		10,345			11,257
Data processing service expense		3,566		3,081		7,232			6,491
FDIC and regulatory assessments		2,446		2,132		4,861			4,608
Marketing expense		915		979		2,801			3,120
Other real estate owned expense/(income)		452		369		(3,652	)		649
Amortization of investments in low income housing and alternative energy partnerships		12,934		9,102		26,824			19,912
Amortization of core deposit intangibles		171		171		343			343
Other operating expense		5,843		6,237		9,218			12,101
Total non-interest expense		67,268		69,546		132,422			140,516

Income before income tax expense		57,813		86,627		113,756			171,894
Income tax expense		3,492		14,383		12,583			32,971
Net income	$	54,321	$	72,244	$

Price	35.26	EPS	3
Shares	80	P/E	10
MCap	2,832	P/FCF	9
Net Debt	-665	EBIT	530
TEV	2,168	TEV/EBIT	4
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-03-02
10-Q	2019-09-30	Filed 2019-11-08
10-Q	2019-06-30	Filed 2019-08-05
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-03-04
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-08
10-K	2016-12-31	Filed 2017-03-01
10-Q	2016-09-30	Filed 2016-11-07
10-Q	2016-06-30	Filed 2016-08-08
10-Q	2016-03-31	Filed 2016-05-09
10-K	2015-12-31	Filed 2016-02-29
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-03-02
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-03-03
10-Q	2013-09-30	Filed 2013-11-07
10-Q	2013-06-30	Filed 2013-08-08
10-Q	2013-03-31	Filed 2013-05-08
10-K	2012-12-31	Filed 2013-03-01
10-Q	2012-09-30	Filed 2012-11-09
10-Q	2012-06-30	Filed 2012-08-08
10-Q	2012-03-31	Filed 2012-05-08
10-K	2011-12-31	Filed 2012-02-28
10-Q	2011-09-30	Filed 2011-11-04
10-Q	2011-06-30	Filed 2011-08-09
10-Q	2011-03-31	Filed 2011-05-10
10-K	2010-12-31	Filed 2011-02-28
10-Q	2010-09-30	Filed 2010-11-09
10-Q	2010-06-30	Filed 2010-08-09
10-Q	2010-03-31	Filed 2010-05-07
10-K	2009-12-31	Filed 2010-03-16

8-K	2020-07-27	Earnings, Regulation FD, Exhibits
8-K	2020-07-16	Enter Agreement, Officers, Exhibits
8-K	2020-05-18
8-K	2020-04-27
8-K	2020-01-22
8-K	2019-10-17
8-K	2019-10-16
8-K	2019-07-17
8-K	2019-06-20
8-K	2019-05-13
8-K	2019-04-17
8-K	2019-01-23
8-K	2019-01-17
8-K	2018-10-26
8-K	2018-10-17
8-K	2018-07-18
8-K	2018-05-14
8-K	2018-04-18
8-K	2018-03-09
8-K	2018-02-25
8-K	2018-01-30

EX-10.1	ex_197249.htm
EX-31.1	ex_196638.htm
EX-31.2	ex_196639.htm
EX-32.1	ex_196640.htm
EX-32.2	ex_196641.htm

CATY 10Q Quarterly Report

Cathay General Bancorp Earnings 2020-06-30