<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 18, 1996
- -------------------------------------------------------------------------------
CATHAY BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-18630 95-4274680
- -------------------------------------------------------------------------------
(State of Organization) (Commission Number) (IRS Employer I.D. #)
777 North Broadway, Los Angeles, California 90012 94111
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213) 625-4700
- -------------------------------------------------------------------------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 18, 1996, Cathay Bancorp, Inc. ("Bancorp")
completed an acquisition of First Public Savings Bank, F.S.B. ("First Public").
The acquisition was structured as a merger of First Public into Cathay Bank
("Cathay Bank"), with Cathay Bank as the surviving corporation (the "Merger"),
pursuant to an Agreement and Plan of Merger dated as of May 30, 1996 (the
"Merger Agreement"), among Bancorp, Cathay Bank and First Public. Cathay Bank
is a wholly owned subsidiary of Bancorp.
The total consideration paid to the shareholders of First
Public in the Merger was $31.6 million, consisting of approximately 905,870
shares of Bancorp's common stock valued at $16.116 million and $15.484 million
in cash. The total consideration was determined by a formula that was based on
the average high and low sales prices of Bancorp common stock reported on the
Nasdaq National Market for the 20 trading days on which Bancorp common stock
was traded immediately before the date that was five business days before the
closing date of the Merger (the "Calculation Date Bancorp Stock Price"). If
the Calculation Date Bancorp Stock Price was between $14 and $20, then the
total consideration payable to First Public shareholders was fixed under the
Merger Agreement at $31.6 million. If the Calculation Date Bancorp Stock Price
was less than $14 or greater than $20, then the total consideration payable to
First Public shareholders was subject to adjustment as provided in the Merger
Agreement. Since the Calculation Date Bancorp Stock Price was approximately
$17.79, the total consideration paid to the First Public shareholders in the
Merger was $31.6 million.
Under the Merger Agreement, First Public shareholders were
entitled to elect to receive cash or Bancorp common stock in the Merger,
subject to certain allocation procedures which caused 51% of the total
consideration ($16.116 million) to be paid in Bancorp common stock and 49% of
the total consideration ($15.484 million) to be paid in cash. These procedures
were intended to assist in the characterization of the Merger as a
reorganization under the Internal Revenue Code. The Merger was accounted for
under the purchase method of accounting.
The number of shares of Bancorp common stock issuable in the
Merger was calculated as provided in the Merger Agreement by taking the value
of the consideration to be paid in Bancorp common stock ($16.116 million)
divided by the Calculation Date Bancorp Stock Price (approximately $17.79 per
share). This formula resulted in approximately 905,870 shares of Bancorp's
common stock being issued in the Merger, subject to reduction for cash given in
lieu of fractional shares. The $15.484 million in cash payable by Bancorp to
First Public shareholders in the Merger was funded by Bancorp through working
capital.
The amount of consideration paid to First Public shareholders
in the Merger was determined through arms' length negotiations between members
of the respective Boards of Directors of Bancorp and First Public. No one
principle or valuation method was used to determine the amount of consideration
paid to First Public shareholders in the Merger. In determining the amount of
consideration it was willing to pay to First Public shareholders in
- 2 -
<PAGE> 3
the Merger, Bancorp's Board of Directors analyzed, among other things, the
historical financial performance of First Public, publicly available financial
information of certain other thrift institutions and financial terms of certain
other mergers and acquisitions involving thrift institutions.
The officers, directors and significant First Public
shareholders had no special or additional arrangements or agreements arising
out of, or resulting from, the Merger Agreement or the Merger, except as
follows: (i) Bancorp agreed to indemnify officers and directors of First Public
for certain actions; (ii) certain directors of First Public were given the
right under the Merger Agreement to elect a certain payment option prior to the
termination of the Directors' Retirement Plan of First Public; (iii) eight
officers of First Public were paid an aggregate of $400,000 in special cash
retention and transition bonuses out of pre-closing earnings of First Public
for their past services and their continued assistance in completing the
Merger; and (iv) one director of First Public was paid a monthly retainer fee
of $3,000 per month plus expenses, beginning with the month of February 1996
and ending in November 1996 (the month in which the Merger closed), in
connection with his performance of services relating to completion of the
Merger.
At the time the Merger was approved and immediately prior to
the completion of the Merger, the executive officers, directors and significant
shareholders of First Public may have been deemed to have beneficial ownership
of 1,570,000 (39.3%) of the outstanding shares of First Public stock. At such
time, Bancorp did not beneficially own any shares of First Public stock. At
the time the Merger was approved and immediately prior to the completion of the
Merger, certain directors and executive officers of Bancorp owned shares of
First Public stock, and certain directors and executive officers of First
Public owned shares of Bancorp common stock. The number of shares of First
Public stock owned by directors and officers of Bancorp and the number of
shares of Bancorp common stock owned by directors and officers of First Public
amounted to less than 1% of the outstanding stock of First Public and Bancorp,
respectively. The executive officers, directors and significant shareholders
of First Public and executive officers and directors of Bancorp who owned
shares of First Public stock did not receive any additional consideration or
remuneration in the Merger, except for the consideration for certain Merger
related services described in the preceding paragraph and the per share
consideration for the shares of First Public stock they owned (which per share
consideration was identical to the per share consideration payable to all other
shareholders of First Public).
By operation of the Merger, Cathay Bank acquired all of the
assets and assumed all of the outstanding liabilities of First Public. In the
Merger, Cathay Bank acquired deposit accounts, a loan portfolio (consisting of
single-family residential, multi-family, commercial and industrial and other
secured and unsecured loans), mortgage-backed securities and certain other
securities that qualify as liquid assets under the regulations of the Office of
Thrift Supervision. In addition, Cathay Bank acquired in the Merger fee
interests to certain real property and improvements relating to First Public's
existing corporate offices, planned corporate offices and five branch offices.
Cathay Bank currently intends to continue operations on the property where
First Public's corporate offices were located and sell or
- 3 -
<PAGE> 4
hold for investment the property scheduled by First Public to be developed for
its new corporate offices. Also, Cathay Bank currently intends to operate
First Public's branch offices existing at the time of the Merger as branch
offices of Cathay Bank after the Merger. No assurance can be given that Cathay
Bank will not change in the future the above-described uses of the real
property acquired from First Public in the Merger.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
In accordance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (collectively,
the "Exchange Act"), the following pro forma financial statements are being
filed as part of this Current Report: (i) Pro Forma Condensed Combined Balance
Sheet dated September 30, 1996; and (ii) Pro Forma Condensed Combined
Statements of Income for the year ended December 31, 1995 and the nine months
ended September 30, 1996. In accordance with the Exchange Act, the following
financial statements of First Public are hereby incorporated by reference into
this Current Report from Amendment No. 1 to Bancorp's Registration Statement on
Form S-4 filed with the Securities and Exchange Commission on October 10, 1996
(File No. 333-12177): (i) Consolidated Statements of Financial Condition of
First Public and Subsidiary dated as of December 31, 1995 and 1994; (ii)
Consolidated Statements of Earnings, Stockholders' Equity and Cash Flows of
First Public and Subsidiary for each of the years ended December 31, 1995, 1994
and 1993. In addition, a press release announcing the Merger is being filed as
an exhibit to this Current Report.
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CATHAY BANCORP, INC.
Date: December 2, 1996 By: /s/ DUNSON K. CHENG
--------------------------------
Dunson K. Cheng
President and Chairman
- 4 -
<PAGE> 5
Pro Forma Condensed Combined Balance Sheet
<TABLE>
<CAPTION>
September 30, 1996
(unaudited)
Dr(Cr)
Bancorp First Public Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ------------ ----------- ---------
(Dollar in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks .............. $ 60,724 $ 13,610 $ (500) $ 73,834
Interest-bearing deposits
in other banks...................... - 200 - 200
Investment Securities................. 443,555 65,528 (15,484) 494,306
707
Mortgage-backed securities............ 52,548 44,245 111 96,904
Loans receivable, net................. 570,790 144,913 1,584 717,287
Core deposits intangibles............. - - - -
Other assets.......................... 72,530 9,424 (1,496) 80,458
Goodwill.............................. 9,837 9,837
----------- ------------ ----------- -----------
Total assets........................ $ 1,200,147 $ 277,920 $ (5,241) $ 1,472,826
=========== ============ ============ ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Deposits.............................. $ 1,087,753 $ 251,388 $ 324 $ 1,338,817
Federal funds purchased and
repurchase agreements............... - - - -
Accrued interest payable and other
liabilities......................... 13,096 4,017 (1,482) 18,595
----------- ------------ ----------- -----------
Total liabilities................... 1,100,849 255,405 (1,158) 1,357,412
----------- ------------ ----------- -----------
SHAREHOLDERS' EQUITY
Common Stock: 8,922,540 pro forma
shares outstanding.................. 80 4,000 3,991 89
Capital in excess of par value........ 43,370 - (16,107) 59,477
Net unrealized gain (loss)............ (1,346) (616) (616) (1,346)
Retained earnings..................... 57,194 19,131 19,131 57,194
----------- ------------ ----------- -----------
Total Shareholders'
Equity 99,298 22,515 6,399 115,414
----------- ------------ ----------- -----------
Total Liabilities and
Shareholders' Equity.............. $ 1,200,147 $ 277,920 $ 5,241 $ 1,472,826
=========== ============ =========== ===========
Book value per common share........... $ 12.49 $ 5.63 $ - $ 13.03
</TABLE>
<PAGE> 6
Pro Forma Condensed Combined Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the
Nine Months Ended For the Year
September 30, 1996 Ended December 31, 1995
------------------ -----------------------
First Adjust- Pro Forma First Adjust- Pro Forma
(in thousands) Bancorp Public ments Ref Combined Bancorp Public ments Ref Combined
-------- -------- -------- --- --------- -------- -------- -------- --- ---------
Dr(Cr) Dr(Cr)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income .......... $ 61,989 $ 14,772 $ 655 (a) $ 76,106 $ 76,223 $ 18,627 $ 785 (a) $ 94,065
Total interest expense.......... 28,243 6,641 (652)(b) 34,232 31,281 8,428 (869)(b) 38,840
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income............. 33,746 8,131 3 41,874 44,942 10,199 (84) 55,225
Provision for loan losses....... 2,700 142 - 2,842 7,301 301 - 7,602
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses..... 31,046 7,989 3 39,032 37,641 9,898 (84) 47,623
Non-interest income............. 4,202 173 - 4,375 6,221 657 - 6,878
Non-interest expenses -
Salaries and employee benefits 9,302 2,440 (1,633)(c) 10,109 12,912 2,926 (2,203)(c) 13,635
Other expenses ............... 10,240 3,918 (377)(c) 13,781 14,705 2,743 (486)(c) 16,962
-------- -------- -------- -------- -------- -------- -------- --------
Income before taxes............. 15,706 1,804 (2,007) 19,517 16,245 4,886 (2,773) 23,904
Income taxes.................... 5,992 748 999 (d) 7,739 5,624 2,026 1,375 (d) 9,025
-------- -------- -------- -------- -------- -------- -------- ---------
Net income...................... $ 9,714 $ 1,056 $ (1,008) $ 11,778 $ 10,621 $ 2,860 $ (1,398) $ 14,879
======== ======== ======== ======== ======== ======== ======== =========
PER SHARE DATA
Net Income per Common Share (e) $ 1.23 $ 0.26 $ - $ 1.34 $ 1.36 $ 0.72 $ - $ 1.72
</TABLE>
<PAGE> 7
NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Balance Sheet
The Total Consideration Value is $31,600,000, with Total Cash Consideration
not to exceed 49% and the balance, 51% in Bancorp stock. The cash payment of
$15,484,000 to be paid with proceeds from securities due to mature in the
second half of 1996. Cathay Bancorp Inc. will issue new stock to settle the
remaining balance of the purchase price, $16,116,000. The number of shares to
be tendered is 905,870, based on the Calculation Date Cathay Bancorp Stock
Price of $17.790625 computed using the quotient of (i) the sum of each of the
high and low sales prices of Bancorp Stock as reported in The Wall Street
Journal as Nasdaq National Market System transactions on each of the 20 days on
which Bancorp Stock was traded immediately before November 8, 1996 which is
five business days before the closing date, November 18, 1996 divided by (ii)
40. The additional capital of $16,107,000 reflects the issuance of 905,870
shares of Bancorp stock which is computed based on a par value of $0.01 per
share.
The purchase price of $31,600,000 is allocated to the assets acquired and
the liabilities assumed based on their estimated fair values at September 30,
1996 in accordance with Accounting Principles Board Opinion No. 16, "Business
Combination," as amended ("APB No. 16"). The table below reflects the
allocation of the purchase price and the resultant goodwill. Total Goodwill of
approximately $9,837,000 is expected to be amortized over 15 years.
<TABLE>
<CAPTION>
(Dollars in thousands)
Purchase Price
Asset/Liabilities Allocation
<S> <C>
Cash $ (500)
Investment securities 707
Mortgage-backed securities 111
Loans receivable, net 1,584
Other real estate owned (1,681)
Deferred tax assets 185
Time deposits 324
Other liabilities (1,482)
Remaining unallocated purchase
price (Goodwill) 9,837
</TABLE>
Included in the Goodwill above is $500,000 in direct costs to be paid at
closing and an additional $1,482,000 of restructuring costs including the
termination of contracts and leases; severence package; directors retirement
plan and one-time charges related to First Public.
Statements of Income
(a) Decrease in securities interest income is due to proceeds from the
maturity of $15,000,000 in US Treasury note being used to pay for the purchase.
The loss in interest income is estimated to be $655,000 and $785,000 for the
nine-month and 12-month period beginning January 1, 1996 and January 1, 1995,
respectively.
<PAGE> 8
(b) The decrease in interest expense paid on the deposits from First Public
Savings Bank is based on an estimated 20% runoff over the course of the first
12-month period after the merger. The decrease in interest expense for the
nine-month and 12-month period beginning January 1, 1996 and January 1, 1995,
is $652,000 and $869,000 respectively, was computed using First Public's cost
of funds as of December 31, 1995 - 3.644%, assuming that runoff will occur
evenly monthly over the period.
(c) Non-interest expense includes the projected direct cost savings from the
Merger, and the amortization of goodwill for the nine-month period and the
12-month period beginning January 1, 1996 and January 1, 1995, respectively,
based on an estimated 15-year amortization period. The expected savings in
merging First Public Savings Bank's operation include reductions in salaries
and employee benefits; occupancy; office and equipment and other areas of
reduntant expenses. The estimated expenses for the nine-month and 12-month
period beginning January 1, 1996 and January 1, 1995 are as follow:
<TABLE>
<CAPTION>
Debit(Credit) Debit(Credit)
Nine-Month 12-month
Period Period
<S> <C> <C>
Salary and employee benefits $(1,633,000) $(2,203,000)
Other expenses
Occupancy (349,000) (466,000)
Office and equipment (26,000) (5,000)
Other areas of operation (494,000) (650,000)
Goodwill amortization 492,000 665,000
</TABLE>
(d) Additional income tax expense is computed using a 40% tax rate. The tax
attributes of First Public Savings Bank will carry over to the Bank including
all assets and liabilities and are recorded at amounts previously reflected,
adjusted for purchase price allocations. Goodwill is not tax deductible.
(e) The pro forma combined net income per common share data are based on
combined historical income of First Public and Bancorp assuming the Merger is
accounted for as a purchase.
<PAGE> 9
EXHIBIT LIST
99.1. Press Release announcing the merger of First Public Savings Bank,
F.S.B. into Cathay Bank.
<PAGE> 1
EXHIBIT 99.1
[LOGO] CATHAY BANK
November 18, 1996
Contact: Dunson Cheng
Chairman and President
(213) 625-4800
FOR IMMEDIATE RELEASE
CATHAY BANCORP COMPLETES THE ACQUISITION OF
FIRST PUBLIC SAVINGS BANK.
CATHAY BANK BECOMES THE 7TH LARGEST BANK IN LOS ANGELES COUNTY.
- -------------------------------------------------------------------------------
(Los Angeles, California) - Cathay Bancorp, Inc. (Cathay) (NASD: CATY)
announces today that it has completed the acquisition of First Public Savings
Bank, F.S.B. (First Public). With the acquisition, First Public will merge
into Cathay Bank, a subsidiary of Cathay Bancorp, Inc. The total price paid by
Cathay to acquire the First Public shares was $31.6 million in cash and stock.
"This acquisition enables Cathay to broaden our customer base and expand our
services to the community," said Dunson Cheng, Chairman of the Board of Cathay
Bancorp, Inc. "The resources that we have added will significantly enhance
Cathay Bank's capabilities, and we look forward to continuing years of growth
and success."
Jack C. Lee, Chairman of the Board of First Public, added, "We are very pleased
about joining the Cathay family, and are pleased that Cathay Bank is committed
to providing our customers with the same high level of service that they have
been accustomed to."
Upon merger completion, Cathay Bank becomes the seventh largest bank in Los
Angeles County in terms of assets. In 1994, Cathay Bank received a "10-year
Continued Premier Performing Bank Award" by Findley Reports, which placed it
among the top six California financial institutions for safety, strength and
performance. This high level of excellence once again confirms the Bank's
underlying financial stability, as well as its ability to respond promptly to
changing market dynamics.
First Public is a federally chartered savings bank with five branches in
southern California. At June 30, 1996, First Public had total assets of $279.7
million and total common shareholders' equity of $22.8 million. For the year
ended December 31, 1995, First Public reported net income of $2.9 million.
First Public opened for business in August 1979 to provide for the banking
needs of the Chinese-American community and the growing number of Chinese
immigrants.
Founded in 1962, Cathay Bank currently operates 20 branches in California after
the acquisition. As of October 31, 1996, the combined company had total assets
of approximately $1.5 billion, and total deposits of approximately $1.35
billion.
