Cathay General Bancorp (CATY) Q4 2012 earnings summary

Executive summary

• 2012 net income attributable to common stockholders was $101.0M, or $1.28 diluted EPS, versus $83.7M and $1.06 in 2011; improved credit costs and lower funding costs drove gains.

• Asset quality improved: non-performing assets fell 49.8% to $150.9M and net charge-offs declined 77.9% to $14.7M; the Bank’s regulatory MOU ended in November.

Financial highlights

• Net interest income rose 2.4% to $321.3M in 2012; interest expense fell $31.4M to $108.5M, offsetting a $23.9M decline in taxable-equivalent interest income.

• A $9.0M reversal of provision for credit losses compared with $27.0M provision in 2011; net income attributable to Bancorp increased 17.3% to $117.4M.

• Non-interest income declined 8.6% to $46.5M; non-interest expense rose 3.8% to $192.6M, including a $5.8M jury-verdict accrual and higher OREO costs.

• Total assets were $10.7B, up 0.5%; gross loans grew 5.2% to $7.43B and deposits increased 2.1% to $7.38B.

Outlook and guidance

• Management expected the Bank to pay additional dividends to Bancorp in 2013, subject to regulatory approval, to maintain cash equal to at least two years of operating expenses and support installment repurchases of TARP preferred stock.

• Partial or full redemption of the $258M Series B Preferred Stock was contemplated in 2013, conditional on earnings and regulatory approval for Bank dividends; the preferred dividend rate rises from 5% to 9% in December 2013 if not redeemed.

• Temporary employees and higher professional-services and computer costs reflected preparation for a core system conversion anticipated in July 2013.