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Cathay General Bancorp Announces First Quarter 2018 Results

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Cathay General Bancorp Announces First Quarter 2018 Results

PR Newswire

LOS ANGELES, April 18, 2018 /PRNewswire/ -- Cathay General Bancorp ((the ", Company", , ", we", , ", us", , or ", our", NASDAQ:CATY), the holding company for Cathay Bank, today announced net income of $63.8 million, or $0.78 per share, for the first quarter of 2018.  First quarter 2018 results included a $3.9 million decrease in the fair value of equity securities now recorded in the income statement as a result of the adoption of ASU 2016-01, which reduced earnings per share by $.03.

FINANCIAL PERFORMANCE



Three months ended


March 31, 2018


December 31, 2017


March 31, 2017

Net income

$63.8 million


$25.9 million


$48.9 million

Basic earnings per common share

$0.79


$0.32


$0.61

Diluted earnings per common share

$0.78


$0.32


$0.61

Return on average assets

1.65%


0.66%


1.42%

Return on average total stockholders' equity

12.99%


5.18%


10.73%

Efficiency ratio

43.35%


46.27%


43.66%

Cathay General Bancorp (PRNewsFoto/Cathay General Bancorp) (PRNewsfoto/Cathay General Bancorp)

FIRST QUARTER HIGHLIGHTS

  • Diluted earnings per share increased 27.9% to $0.78 per share for the first quarter of 2018 compared to $0.61 per share for the same quarter a year ago.
  • Net interest margin for the first quarter increased to 3.75% compared to 3.49% in first quarter of 2017 and 3.65% in the fourth quarter of 2017.
  • Total deposits increased by $322 million, or 10.2% annualized, to $13.0 billion, for the quarter.
  • Total loans increased $144 million, or 4.5% annualized, to $13.0 billion for the quarter.

"For the first quarter of 2018, our total loans increased $144 million or 4.5% annualized to $13.0 billion.  Also, our net interest margin increased to 3.75% during the first quarter compared to 3.65% in the fourth quarter of 2017 as our loans repriced more than our deposits," commented Pin Tai, Chief Executive Officer and President of the Company.

Further, Mr. Tai added, "The systems conversion for Far East National Bank onto Cathay's systems is scheduled for this weekend, which allows us to complete the integration of our operations."

FIRST QUARTER INCOME STATEMENT REVIEW

Net income for the quarter ended March 31, 2018, was $63.8 million, an increase of $14.9 million, or 30.4%, compared to net income of $48.9 million for the same quarter a year ago.  Diluted earnings per share for the quarter ended March 31, 2018, was $0.78 compared to $0.61 for the same quarter a year ago.  First quarter net income included a $3.9 million decrease in the fair value of equity securities now recorded in the income statement as a result of the adoption of ASU 2016-01, which reduced first quarter 2018 earnings per share by $.03.

Return on average stockholders' equity was 12.99% and return on average assets was 1.65% for the quarter ended March 31, 2018, compared to a return on average stockholders' equity of 10.73% and a return on average assets of 1.42% for the same quarter a year ago.   

Net interest income before provision for credit losses

Net interest income before provision for credit losses increased $23.2 million, or 20.7%, to $135.3 million during the first quarter of 2018, compared to $112.1 million during the same quarter a year ago.  The increase was due primarily to an increase in interest income from loans and securities, offset by increases in interest expense from time deposits and long-term debt.

The net interest margin was 3.75% for the first quarter of 2018 compared to 3.49% for the first quarter of 2017 and 3.65% for the fourth quarter of 2017. 

For the first quarter of 2018, the yield on average interest-earning assets was 4.42%, the cost of funds on average interest-bearing liabilities was 0.92%, and the cost of interest-bearing deposits was 0.81%.  In comparison, for the first quarter of 2017, the yield on average interest-earning assets was 4.07%, the cost of funds on average interest-bearing liabilities was 0.80%, and the cost of interest-bearing deposits was 0.69%. The increase in the yield on average interest earning assets resulted mainly from higher rates on loans.  The net interest spread, defined as the difference between the yield on average interest-earning assets and the cost of funds on average interest-bearing liabilities, was 3.50% for the quarter ended March 31, 2018, compared to 3.27% for the same quarter a year ago.


Reversal for credit losses

Reversal for credit losses was $3.0 million for the first quarter of 2018 compared to $2.5 million for the first quarter of 2017.  The reversal for credit losses was based on a review of the appropriateness of the allowance for loan losses at March 31, 2018.  The following table summarizes the charge-offs and recoveries for the periods indicated:


Three months ended


March 31, 2018


December 31, 2017


March 31, 2017


(In thousands)

Charge-offs:






  Commercial loans

$                        19


$                        1,503


$                         1,204

  Real estate loans (1)

-


-


555

     Total charge-offs 

19


1,503


1,759

Recoveries:






  Commercial loans

913


2,001


491

  Construction loans

44


86


49

  Real estate loans(1)

867


1,160


296

     Total recoveries

1,824


3,247


836

Net (recoveries)/charge-offs

$                 (1,805)


$                       (1,744)


$                            923


(1) Real estate loans include commercial mortgage loans, residential mortgage loans, and equity lines.

Non-interest income

Non-interest income, which includes revenues from depository service fees, letters of credit commissions, securities gains (losses), wire transfer fees, and other sources of fee income, was $5.3 million for the first quarter of 2018, a decrease of $1.4 million, or 20.9%, compared to $6.7 million for the first quarter of 2017, primarily due to a $3.9 million decrease in the fair value of equity securities and offset by an increase in other operating income of $1.5 million.  

Non-interest expense

Non-interest expense increased $9.1 million, or 17.5%, to $61.0 million in the first quarter of 2018 compared to $51.9 million in the same quarter a year ago.  The increase in non-interest expense in the first quarter of 2018 was primarily due to a $4.5 million increase in salaries and employee benefits expense, partly from the acquisition of Far East National Bank, and a $1.8 million increase in professional services expense when compared to the same quarter a year ago.  The efficiency ratio was 43.4% in the first quarter of 2018 compared to 43.7% for the same quarter a year ago.   

Income taxes

The effective tax rate for the first quarter of 2018 was 22.8% compared to 29.5% for the first quarter of 2017.  The effective tax rate includes the reduction of the corporate tax rate from the enactment of the Tax Cuts and Jobs Act and the impact of low income h

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