CATHAY GENERAL BANCORP [CATY] Filings

10-Q 1 caty20240930_10q.htm FORM 10-Q caty20240930_10q.htm

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

September 30, 2024

☐	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

or organization)

(I.R.S. Employer

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, a 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, $0.01 par value, 71,198,632 shares outstanding as of October 31, 2024.

Table of Contents

CATHAY GENERAL BANCORP AND SUBSIDIARIES

3RD QUARTER 2024 REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		2
Item 1.	FINANCIAL STATEMENTS (Unaudited)	2
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	7
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
Item 4.	CONTROLS AND PROCEDURES	46
PART II – OTHER INFORMATION		46
Item 1.	LEGAL PROCEEDINGS	46
Item 1A.	RISK FACTORS	46
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	46
Item 3.	DEFAULTS UPON SENIOR SECURITIES	47
Item 4.	MINE SAFETY DISCLOSURES	47
Item 5.	OTHER INFORMATION	47
Item 6.	EXHIBITS	47
SIGNATURES		48

Table of Contents

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 clients and our operations, assets and liabilities;

●

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;

●

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;

●

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) 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 Bancorp 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, 2023 (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.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (Unaudited)

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	*September 30, 2024*			*December 31, 2023*
	(In thousands, except share data)
Assets
Cash and due from banks	$	182,542		$	173,988
Short-term investments and interest-bearing deposits		1,156,223			654,813
Securities available-for-sale (amortized cost of $1,602,696 at September 30, 2024, and $1,726,080 at December 31, 2023)		1,508,356			1,604,570
Loans held for sale		5,190			—
Loans held for investment		19,373,593			19,548,140
Less: Allowance for loan losses		(163,733	)		(154,562	)
Unamortized deferred loan fees, net		(10,505	)		(10,720	)
Loans held for investment, net		19,199,355			19,382,858
Equity securities		35,741			40,406
Federal Home Loan Bank stock		17,250			17,746
Other real estate owned, net		18,277			19,441
Affordable housing investments and alternative energy partnerships, net		280,091			315,683
Premises and equipment, net		89,158			91,097
Customers’ liability on acceptances		12,043			3,264
Accrued interest receivable		95,351			97,673
Goodwill		375,696			375,696
Other intangible assets, net		3,590			4,461
Right-of-use assets - operating leases		30,543			32,076
Other assets		265,037			267,762
Total assets	$	23,274,443		$	23,081,534

Liabilities and Stockholders’ Equity
Deposits:
Non-interest-bearing	$	3,253,823		$	3,529,018
Interest-bearing:
NOW deposits		2,093,861			2,370,685
Money market deposits		3,134,460			3,049,754
Savings deposits		1,215,974			1,039,203
Time deposits		10,245,823			9,336,787
Total deposits		19,943,941			19,325,447
Advances from the Federal Home Loan Bank		60,000			540,000
Other borrowings of affordable housing investments		17,783			15,787
Long-term debt		119,136			119,136
Acceptances outstanding		12,043			3,264
Lease liabilities - operating leases		32,906			34,797
Other liabilities		258,321			306,528
Total liabilities		20,444,130			20,344,959
Commitments and contingencies		—			—
Stockholders’ Equity
Common stock, $0.01 par value, 100,000,000 shares authorized; 91,601,352 issued and 71,355,869 outstanding at September 30, 2024, and 91,392,480 issued and 72,668,927 outstanding at December 31, 2023		916			914
Additional paid-in-capital		991,362			987,953
Accumulated other comprehensive loss, net		(66,453	)		(85,416	)
Retained earnings		2,632,315			2,500,341
Treasury stock, at cost (20,245,483 shares at September 30, 2024, and 18,723,553 shares at December 31, 2023)		(727,827	)		(667,217	)
Total stockholders' equity		2,830,313			2,736,575
Total liabilities and stockholders' equity	$	23,274,443		$	23,081,534

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

	*Three Months Ended September 30,*					*Nine Months Ended September 30,*
	*2024*		*2023*			*2024*			*2023*
	(In thousands, except share and per share data)
Interest and Dividend Income
Loans receivable	$	310,311	$	293,108		$	916,175		$	827,765
Investment securities		15,125		12,698			45,720			36,832
Federal Home Loan Bank stock		375		355			1,305			957
Deposits with banks		13,680		17,307			41,793			43,405
Total interest and dividend income		339,491		323,468			1,004,993			908,959

Interest Expense
Time deposits		119,786		90,022			347,408			234,171
Other deposits		45,918		38,207			133,218			92,683
Advances from Federal Home Loan Bank		1,885		6,779			13,517			14,875
Long-term debt		2,351		1,726			5,935			4,721
Short-term debt		396		1,094			1,872			2,901
Total interest expense		170,336		137,828			501,950			349,351

Net interest income before provision for credit losses		169,155		185,640			503,043			559,608
Provision for credit losses		14,500		7,000			23,000			24,255
Net interest income after provision for credit losses		154,655		178,640			480,043			535,353

Non-Interest Income
Net gains/(losses) from equity securities		4,253		(6,218	)		(6,204	)		9,298
Net gains/(losses) from securities available for sale		—		—			1,107			(3,000	)
Letters of credit commissions		2,081		1,738			5,686			4,972
Depository service fees		1,572		1,536			4,900			5,009
Wealth management fees		6,545		5,150			17,861			12,686
Other operating income		5,914		5,631			16,841			16,226
Total non-interest income		20,365		7,837			40,191			45,191

Non-Interest Expense
Salaries and employee benefits		40,859		38,774			124,850			114,048
Occupancy expense		5,938		5,851			17,557			16,883
Computer and equipment expense		4,753		4,387			15,212			12,899
Professional services expense		7,021		7,906			22,225			24,212
Data processing service expense		4,330		3,614			12,136			11,010
FDIC and regulatory assessments		3,250		3,063			13,081			9,230
Marketing expense		1,614		1,587			5,002			4,777
Other real estate owned expense		596		435			2,331			566
Amortization of investments in low-income housing and alternative energy partnerships		24,077		23,157			61,905			60,497
Amortization of core deposit intangibles		250		250			848			1,059
Other operating expense		4,179		4,949			14,311			14,799
Total non-interest expense		96,867		93,973			289,458			269,980

Income before income tax expense		78,153		92,504			230,776			310,564
Income tax expense		10,639		10,133			24,998			38,966
Net income	$	67,514	$	82,371		$	205,778		$	271,598

Other Comprehensive Income/(Loss), net of tax
Net holding gains/(losses) on securities available-for-sale		26,607		(24,043	)		19,737			(19,915	)
Net holding losses on cash flow hedge derivatives		—		(441	)		(774	)		(1,323	)
Total other comprehensive income/(loss), net of tax		26,607		(24,484	)		18,963			(21,238	)
Total comprehensive income	$	94,121	$	57,887		$	224,741		$	250,360

Net Income Per Common Share:
Basic	$	0.94	$	1.14		$	2.84		$	3.74
Diluted	$	0.94	$	1.13		$	2.83		$	3.73
Cash dividends paid per common share	$	0.34	$	0.34		$	1.02		$	1.02
Average Common Shares Outstanding:
Basic		71,786,624		72,568,518			72,370,995			72,546,149
Diluted		72,032,456		72,890,414			72,607,550			72,847,907

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

										*Accumulated*
	*Common Stock*						*Additional*			*Other*									*Total*
	*Number of*						*Paid-in*			*Comprehensive*			*Retained*			*Treasury*			*Stockholders'*
Three Months Ended	*Shares*			*Amount*			*Capital*			*Loss*			*Earnings*			*Stock*			*Equity*
	(In thousands, except share and per share data)
Balance at June 30, 2024		72,170,433		$	916		$	988,772		$	(93,060	)	$	2,589,132		$	(692,518	)	$	2,793,242
Dividend Reinvestment Plan		17,332			1			728			—			—			—			729
Restricted stock units vested		564			(1	)		—			—			—			—			(1	)
Stock issued to directors		—			—			(1	)		—			—			—			(1	)
Shares withheld related to net share settlement of RSUs		—			—			(13	)		—			—			—			(13	)
Purchases of treasury stock		(832,460	)		—			—			—			—			(35,309	)		(35,309	)
Stock-based compensation		—			—			1,876			—			—			—			1,876
Cash dividends of $0.34 per share		—			—			—			—			(24,331	)		—			(24,331	)
Other comprehensive income		—			—			—			26,607			—			—			26,607
Net income		—			—			—			—			67,514			—			67,514
Balance at September 30, 2024		71,355,869		$	916		$	991,362		$	(66,453	)	$	2,632,315		$	(727,827	)	$	2,830,313

								*Accumulated*
	*Common Stock*				*Additional*			*Other*									*Total*
	*Number of*				*Paid-in*			*Comprehensive*			*Retained*			*Treasury*			*Stockholders'*
Three Months Ended	*Shares*		*Amount*		*Capital*			*Loss*			*Earnings*			*Stock*			*Equity*
	(In thousands, except share and per share data)
Balance at June 30, 2023		72,563,169	$	913	$	983,233		$	(99,049	)	$	2,384,817		$	(667,243	)	$	2,602,671
Dividend Reinvestment Plan		23,397		—		865			—			—			—			865
Restricted stock units vested		426		—		—			—			—			—			—
Stock issued to directors		—		—		—			—			—			—			—
Shares withheld related to net share settlement of RSUs		—		—		(11	)		—			—			—			(11	)
Purchases of treasury stock		—		—		—			—			—			9			9
Stock-based compensation		—		—		1,987			—			—			—			1,987
Cash dividends of $0.34 per share		—		—		—			—			(24,672	)		—			(24,672	)
Other comprehensive loss		—		—		—			(24,484	)		—			—			(24,484	)
Net income		—		—		—			—			82,371			—			82,371
Balance at September 30, 2023		72,586,992	$	913	$	986,074		$	(123,533	)	$	2,442,516		$	(667,234	)	$	2,638,736

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

									*Accumulated*
	*Common Stock*					*Additional*			*Other*									*Total*
	*Number of*					*Paid-in*			*Comprehensive*			*Retained*			*Treasury*			*Stockholders'*
Nine Months Ended	*Shares*			*Amount*		*Capital*			*Loss*			*Earnings*			*Stock*			*Equity*
	(In thousands, except share and per share data)
Balance at December 31, 2023		72,668,927		$	914	$	987,953		$	(85,416	)	$	2,500,341		$	(667,217	)	$	2,736,575
Dividend Reinvestment Plan		56,574			1		2,216			—			—			—			2,217
Restricted stock units vested		128,178			1		—			—			—			—			1
Stock issued to directors		24,120			—		850			—			—			—			850
Shares withheld related to net share settlement of RSUs		—			—		(3,722	)		—			—			—			(3,722	)
Purchases of treasury stock		(1,521,930	)		—		—			—			—			(60,610	)		(60,610	)
Stock-based compensation		—			—		4,065			—			—			—			4,065
Cash dividends of $1.02 per share		—			—		—			—			(73,804	)		—			(73,804	)
Other comprehensive income		—			—		—			18,963			—			—			18,963
Net income		—			—		—			—			205,778			—			205,778
Balance at September 30, 2024		71,355,869		$	916	$	991,362		$	(66,453	)	$	2,632,315		$	(727,827	)	$	2,830,313

							*Accumulated*
	*Common Stock*				*Additional*		*Other*								*Total*
	*Number of*				*Paid-in*		*Comprehensive*			*Retained*		*Treasury*			*Stockholders'*
Nine Months Ended	*Shares*		*Amount*		*Capital*		*Loss*			*Earnings*		*Stock*			*Equity*
	(In thousands, except share and per share data)
Balance at December 31, 2022		72,742,151	$	911	$	981,119	$	(102,295	)	$	2,244,856	$	(650,551	)	$	2,474,040
Dividend Reinvestment Plan		73,269		1		2,698		—			—		—			2,699
Restricted stock units vested		121,302		1		—		—			—		—			1
Stock issued to directors