Cathay General Bancorp (CATY) Q4 2007 earnings summary

Executive summary

• FY2007 net income was $125.5M, or $2.46 diluted EPS, up from $117.6M and $2.27 in 2006; loan and securities growth supported results.

• Assets rose 29.5% to $10.4B; gross loans increased 16.3% to $6.68B and deposits grew 10.6% to $6.28B.

• Credit quality weakened, with non-performing assets up 135% to $83.7M; the allowance for credit losses rose to $69.6M, including off-balance-sheet commitments.

Financial highlights

• Net interest income increased 10.8% to $309.5M; provision for credit losses rose to $11.0M from $2.0M in 2006.

• Income before tax was $196.7M; net income was $125.5M. Non-interest income reached $27.5M, while non-interest expense increased 13.5% to $129.3M.

• Q4 2007 net income was $30.9M; basic EPS was $0.62 and diluted EPS was $0.62.

• One-time items included a $2.7M gain on sale of a former branch property, $2.2M gain on Freddie Mac preferred stock, and $746K impairment charge on Broadway Financial shares.

Outlook and guidance

• Management expected available liquidity sources to meet operating needs for the next 12 months; expected time-deposit runoff at maturity was considered manageable based on historical experience.

• Plans included continued branch expansion and acquisition opportunities; relocation to the renovated South El Monte office was expected in H2 2008.

• Management intended to reduce the 21.8% modeled decline in portfolio net economic value under an immediate 200-bp rate increase, above its 15% policy limit.