Fitch Affirms Cathay General Bancorp's Ratings; Outlook Negative

Fitch Ratings has affirmed the long-term Issuer Default Ratings (IDR) for Cathay General Bancorp (CATY) and its bank subsidiary, Cathay Bank at 'BB'. The Rating Outlook is Negative. A complete list of ratings is provided at the end of this release.

Fitch's affirmation of CATY's ratings follows a further analysis of the company's commercial real estate (CRE) portfolio (please see the Fitch report 'U.S. Bank CRE Exposure Review' dated Nov. 16, 2009). Based on this analysis, Fitch believes CATY could suffer further material losses over the coming quarters considering its portfolio is highly concentrated in CRE, the majority of which is located in California. CATY's CRE portfolio represents approximately 68% of total loans and 357% of total equity.

Despite the view that CATY will remain under considerable credit stress, Fitch has affirmed CATY's ratings due to the company's demonstrated ability to raise needed capital to bolster its equity base and the stabilization in negative credit trends. The company has raised approximately $220 million in common equity since October 2009 and the company also has been successful in reducing higher risk elements of its portfolio. Without the recent addition of new capital and the stabilization in negative credit trends, CATY's ratings would have likely been downgraded. The Negative Rating Outlook reflects Fitch's concern that given CATY's credit concentration, the loan portfolio could generate losses which materially weaken the company's recently augmented capital base.

Although Fitch affirmed CATY's long-term IDR, the notching on the company's preferred stock has been widened to three from its long-term IDR. Given the company's current and prospective performance challenges, as well as the presence of a Memorandum of Understanding (MOU) with the Federal Reserve Bank of San Francisco, which requires the company to seek regulatory approval to pay dividends, Fitch believes there is a heightened risk of deferral on CATY's preferred stock dividends. Fitch considers deferral of dividends on hybrid securities as nonperformance.

CATY is an $11.5 billion bank holding company headquartered in Los Angeles, CA and focuses on the Asian banking market in its geographic footprint. CATY has expanded in the Asian-American communities across the country with a presence in New York, Chicago, Massachusetts, New Jersey, Texas, and Washington State.

This rating action reflects the application of Fitch's current criteria which is available on Fitch's web site at 'www.fitchratings.com' and specifically include:

--Master Global Financial Institutions Criteria (Dec. 29, 2009)

--Bank Holding Companies (Dec. 30, 2009)

--Rating Hybrid Securities (Dec. 29, 2009)

--Equity Credit for Hybrid & Other Capital Securities (Dec. 29, 2009)

Fitch has taken the following rating actions:

Cathay General Bancorp

--Long-term Issuer Default Ratings (IDR) affirmed at 'BB';

--Short-term IDR affirmed at 'B';

--Preferred stock rating downgraded to 'B' from 'B+';

--Individual affirmed at 'C/D';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Cathay Bank

--Long-term IDR affirmed at 'BB';

--Short-term IDR affirmed at 'B';

--Long-term deposits affirmed at 'BB+';

--Short-term deposits affirmed at 'B';

--Individual affirmed at 'C/D';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Additional information is available at 'www.fitchratings.com'.

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