<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ------------------------
Commission file number 0-18630
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CATHAY BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-4274680
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 North Broadway, Los Angeles, California 90012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 625-4700
---------------------------
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, $.01 par value, 8,914,260 shares outstanding as of June 30,
1997.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1 Financial Statements . . . . . . . . . . . . . . . . . . . . 4-6
Notes to Condensed Consolidated Financial Statements . . . . 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .9-18
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .19
Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .19
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . .19
Item 3. Defaults upon Senior Securities. . . . . . . . . . . . . . . .19
Item 4. Submission of Matters to a Vote of Security Holders. . . . . .19
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . .19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
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CATHAY BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Jun. 30, 1997 Dec. 31, 1996
(unaudited) (unaudited)
<S> ------------- -------------
ASSETS <C> <C>
Cash and due from banks.................................................. $ 56,011 $ 47,194
Federal funds sold and securities purchased under agreement to resell.... 27,000 28,000
------------- -----------
Cash and cash equivalents............................................ 83,011 75,194
Securities available-for-sale (with amortized costs of
$325,529 in 1997 and $385,228 in 1996)............................... 324,144 383,391
Securities held-to-maturity (with estimated fair
values of $267,152 in 1997 and $212,002 in 1996)..................... 265,595 210,129
Loans (net of allowance for loan losses of
$14,026 in 1997 and $13,529 in 1996)................................. 775,833 744,384
Other real estate owned, net............................................. 10,390 18,854
Investments in real estate, net.......................................... 3,850 3,987
Premises and equipment, net.............................................. 25,445 25,771
Customers' liability on acceptance....................................... 6,472 6,653
Accrued interest receivable.............................................. 14,697 15,008
Goodwill................................................................. 9,791 9,897
Other assets............................................................. 12,777 11,061
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Total assets......................................................... $1,532,005 $1,504,329
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing demand deposits................................. $ 148,518 $ 135,345
Interest bearing accounts
NOW accounts.................................................... 116,000 118,498
Money market deposits........................................... 94,849 95,158
Savings deposits................................................ 220,896 224,443
Time deposits under $100,000.................................... 300,320 302,981
Time deposits of $100,000 or more............................... 511,091 488,315
------------- -----------
Total deposits....................................................... 1,391,674 1,364,740
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Securities sold under agreements to repurchase........................... 2,922 10,000
Acceptances outstanding.................................................. 6,472 6,653
Other liabilities........................................................ 4,794 4,490
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Total liabilities.................................................... 1,405,862 1,385,883
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Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 10,000,000
shares authorized, none issued.................................. -- --
Common stock, $.01 par value; 25,000,000 shares
authorized, 8,914,260 and 8,878,144 shares issued and
outstanding in 1997 and 1996, respectively...................... 89 89
Additional paid-in-capital........................................... 60,521 59,812
Unrealized holding loss on securities
available-for-sale, net of tax.................................. (803) (1,059)
Retained earnings.................................................... 66,336 59,604
------------- -----------
Total stockholders' equity........................................... 126,143 118,446
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Total liabilities and stockholders' equity........................... $1,532,005 $1,504,329
------------- -----------
------------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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CATHAY BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
2nd Qtr 2nd Qtr YTD YTD
June 1997 June 1996 June 1997 June 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................. $ 18,435 $ 13,370 $ 35,894 $ 26,682
Interest on securities available-for-sale.................. 4,666 4,336 10,108 8,016
Interest on securities held-to-maturity.................... 4,266 2,680 7,505 5,089
Interest on Federal funds sold and securities purchased
under agreement to resell............................. 233 405 809 840
--------- ---------- --------- ----------
Total interest income...................................... 27,600 20,791 54,316 40,627
--------- ---------- --------- ----------
INTEREST EXPENSE
Time deposits of $100,000 or more.......................... 6,517 5,618 12,496 11,006
Other deposits............................................. 5,788 3,884 11,791 7,558
Other borrowed funds....................................... 40 11 63 57
--------- ---------- --------- ----------
Total interest expense..................................... 12,345 9,513 24,350 18,621
--------- ---------- --------- ----------
Net interest income before provision for loan losses....... 15,255 11,278 29,966 22,006
Provision for loan losses.................................. 900 900 1,800 1,800
--------- ---------- --------- ----------
Net interest income after provision for loan losses........ 14,355 10,378 28,166 20,206
--------- ---------- --------- ----------
NON-INTEREST INCOME
Securities gains........................................... - - 4 22
Letter of credit commissions............................... 396 322 605 603
Service charges............................................ 848 713 1,664 1,469
Other operating income..................................... 386 304 747 573
--------- ---------- --------- ----------
Total non-interest income.................................. 1,630 1,339 3,020 2,667
--------- ---------- --------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits............................. 4,029 3,092 7,980 6,197
Occupancy expense.......................................... 753 575 1,431 1,128
Computer and equipment expense............................. 552 516 1,152 1,023
Professional services expense.............................. 841 837 1,578 1,550
FDIC and State assessments................................. 96 97 151 183
Marketing expense.......................................... 405 257 816 586
Net other real estate owned expense........................ 220 812 446 1,309
Other operating expense.................................... 1,005 837 1,975 1,609
--------- ---------- --------- ----------
Total non-interest expense................................. 7,901 7,023 15,529 13,585
--------- ---------- --------- ----------
Income before income tax expense........................... 8,084 4,694 15,657 9,288
Income tax expense............................................. 3,205 1,598 6,259 3,304
--------- ---------- --------- ----------
Net Income..................................................... $ 4,879 $ 3,096 $ 9,398 $ 5,984
--------- ---------- --------- ----------
--------- ---------- --------- ----------
NET INCOME PER COMMON SHARE, based on the
weighted average number of shares
outstanding during the periods:............................ $ 0.55 $ 0.39 $ 1.06 $ 0.76
Weighted average number of common shares outstanding........... 8,908,789 7,912,070 8,899,796 7,894,413
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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CATHAY BANCORP, INC. & SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
----------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income........................................................................... $ 9,398 $ 5,984
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses................................................... 1,800 1,800
Provision for losses on other real estate owned............................. 275 1,192
Depreciation................................................................ 676 736
Net (gain)loss on disposition of other real estate owned.................... 48 (22)
Premises and equipment disposal gains....................................... - 1
Net gain on sales and calls of securities................................... (4) (22)
Amortization and accretion of investment
security premiums, net.................................................... 312 396
Increase (decrease) in deferred loan fees, net.............................. 28 (16)
(Increase) decrease in accrued interest receivable.......................... 311 (613)
(Increase) decrease in other assets, net.................................... (1,808) 1,429
Increase (decrease) in other liabilities.................................... 304 (286)
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Total adjustments....................................................... 1,942 4,595
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Net cash provided by operating activities............................... 11,340 10,579
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale............................................ (25,006) (80,261)
Proceeds from maturity and call of securities available-for-sale..................... 82,037 25,095
Purchase of securities held-to-maturity.............................................. (10,239) (4,999)
Proceeds from maturity and call of securities held-to-maturity....................... 9,747 11,155
Purchase of mortgage-backed securities available-for-sale............................ - (8,903)
Proceeds from repayments and sale of mortgage-backed securities
available-for-sale............................................................... 2,985 557
Purchase of mortgage-backed securities held-to-maturity.............................. (60,592) (35,194)
Repayments from mortgage-backed securities held-to-maturity.......................... 4,995 739
Proceeds from sale of loans.......................................................... 1,834 -
Net change in loans.................................................................. (30,203) (9,243)
Purchase of premises and equipment................................................... (350) (236)
Proceeds from sale of equipment...................................................... - 7
Proceeds from disposition of other real estate owned................................. 3,233 2,058
Decrease in investments in real estate............................................... 137 69
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities....................................... (21,422) (99,156)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
money market and savings deposits................................................ 6,819 7,049
Net increase in time deposits........................................................ 20,115 87,468
Net decrease in securities sold under agreement to repurchase........................ (7,078) (1,500)
Cash dividends....................................................................... (2,666) (2,362)
Proceeds from shares issued to Dividend Reinvestment Plan............................ 709 1,036
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities................................... 17,899 91,691
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Increase in cash and cash equivalents................................................ 7,817 3,114
Cash and cash equivalents, beginning of the period................................... 75,194 71,326
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Cash and cash equivalents, end of the period......................................... $ 83,011 $ 74,440
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Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest.................................................................... $ 23,949 $ 18,685
Income taxes................................................................ $ 6,316 $ 2,010
Non-cash investing activities:
Transfers to securities available-for-sale.................................. $ 630 $ 105
Net change in unrealized holding gain/loss on securities
available-for-sale, net of tax............................................ $ 256 $ 3,496
Transfers to other real estate owned........................................ $ 1,742 $ 4,439
Loans to facilitate the sale of other real estate owned..................... $ 6,650 $ 2,920
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
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CATHAY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
2. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "EARNINGS PER SHARE".
This Statement establishes standards for computing and presenting earnings
per share (EPS) and applies to entities with publicly held common stock or
potential common stock. This statement simplifies the standards for
computing earnings per share previously found in APB Opinion No. 15, EARNINGS
PER SHARE, and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS pursuant to Opinion 15. This
Statement supersedes Opinion 15 and AICPA Accounting Interpretations 1-102 of
Opinion 15. It also supersedes or amends other accounting pronouncements.
The provisions in this Statement are substantially the same as those in
International Accounting Standard 33, EARNINGS PER SHARE, recently issued by
the International Accounting Standards Committee. This Statement is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods; earlier application is not permitted.
This Statement requires restatement of all prior-period EPS data presented.
Upon adoption of SFAS No. 128, the Company anticipates that its basic EPS
disclosures will be increased as compared to the primary EPS disclosures
presently required by APB Opinion 15. Diluted EPS disclosures are not
expected to differ materially from the fully-diluted disclosures presently
required by APB Opinion 15.
In February 1997 the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 consolidates existing reporting
standards for disclosing information about an entity's capital structure.
SFAS No. 129 also supersedes previously issued accounting statements. SFAS
No. 129 must be adopted for financial statements for periods ending after
December 15, 1997. The impact on the Company of adopting SFAS No. 129 is not
expected to be material as the Company's existing disclosures are generally
in compliance with the disclosure requirements in SFAS No. 129.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a
7
<PAGE>
full set of general-purpose financial statements. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997. The impact on the
Company of adopting SFAS No. 130 is not expected to be material to the
Company's existing disclosure.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes
standards to report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim reports to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and
major customers. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997, with comparative information for
earlier years to be restated. The Company is currently assessing the effect
of adopting SFAS No. 131.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is given based on the assumption that the reader
has access to the 1996 Annual Report of Cathay Bancorp, Inc. ("Bancorp") and
its subsidiary Cathay Bank ("the Bank"), together ("the Company").
RESULTS OF OPERATIONS
For the second quarter of 1997, the Company reported net income of $4.9
million or $0.55 per share, as compared to $3.1 million or $0.39 per share
for the second quarter of 1996, representing an increase of $1.8 million or
57.6%. Income before income tax expense amounted to $8.1 million for the
second quarter of 1997, an increase of $3.4 million or 72.2% over $4.7
million for the same quarter a year ago. The continued strong earnings
growth was due to increases in assets, primarily loans and securities, both
internally and through the acquisition of First Public Savings Bank last
November. The annualized return on average assets and return on average
stockholders' equity were 1.29% and 15.85%, respectively for the second
quarter of 1997, as compared to 1.05% and 13.10%, respectively for the same
quarter of 1996.
For the six month ended June 30, 1997, the Company reported net income of
$9.4 million or $1.06 per share, as compared to $6.0 million or $0.76 per
share for the same period a year ago. This represents an increase of $3.4
million or 57.1%. The annualized return on average assets and return on
average stockholders' equity for the first six months of 1997 were 1.25% and
15.50%, respectively, as compared to 1.07% and 12.72% for the same period in
1996.
NET INTEREST INCOME
For the first six months of 1997 and 1996, net interest income before
provision for loan losses totaled $30.0 million and $22.0 million,
respectively, representing an increase of $8.0 million or 36.2% for 1997. On
a taxable equivalent basis, net interest income totaled $30.5 million and
$22.5 million for the first six months of 1997 and 1996, respectively,
representing an increase of $8.0 million as well or 35.3% for 1997. The
increase in net interest income was substantially attributable to a $338.1
million growth in average earning assets. The increase in average earning
assets was primarily funded by time deposits and, secondarily by
interest-bearing deposits and demand deposits. Although average loans
increased $217.4 million or 39.3% contributing to an increase of $9.2 million
in interest income, the average yield on loans dropped 31 basis points to
9.39% despite a 9 basis point increase in the Bank's reference rate. This
was primarily due to substantial increases in average real estate mortgage
loans from the acquisition of First Public Savings Bank, and to a lesser
extent, the keen competition in the Company's market area. Average real
estate mortgage loans comprised approximately 17.1% of total loans in the
first six months of 1997 as compared to 7.5% in the same period in 1996. The
average taxable equivalent yield on securities and Federal funds sold
improved 29 basis points and 23 basis points to 6.37% and 5.49% in the first
six months of 1997, respectively, while cost of funds shrank 6 basis points
to 3.96%. As a result, net interest margin, defined as taxable equivalent
net interest income to average earning assets, increased 11 basis points from
4.37% in the first six months of 1996 to 4.48% in 1997.
For the second quarter of 1997, net interest income before provision for
loan losses totaled $15.3 million, as compared to $11.3 million for the same
quarter of 1996. This represents an increase of $4.0 million or 35.3%. On a
taxable equivalent basis, net interest income was up $4.0 million as well or
34.5% to $15.5 million for the second quarter of 1997, as compared to $11.5
million for the same quarter of 1996. An increase of $304.4 million in
average earning assets essentially accounted for the increase in the
quarterly net interest income. The taxable equivalent average yield on
earning assets increased 22 basis points in the second quarter of 1997 to
8.12% as compared to 7.90% for the same quarter of 1996, primarily resulting
from higher yields on securities and Federal funds sold. Average loans grew
by $228.3 million or 40.9% in the second quarter of 1997 adding $5.1 million
to interest income. However, average yield on loans decreased 23 basis points
to 9.39% in the second quarter of
9
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1997 as well due to substantially the same reasons as explained previously.
Cost of funds stayed relatively stable at 4.00% for the 1997 second quarter,
which was only 3 basis points higher than 3.97% for the same quarter a year
ago. Consequently, net interest margin improved 19 basis points from 4.33%
to 4.52% between the second quarter of 1996 and 1997.
NON-INTEREST INCOME
For the first six months of 1997, non-interest income totaled $3.0
million, as compared to $2.7 million for the same period a year ago. This
represents an increase of $353,000 or 13.2% resulting from higher income in
service charges, wire transfer fees and fees related to loans.
On a quarterly basis, non-interest income totaled $1.6 million and $1.3
million for the second quarter of 1997 and 1996, respectively. The $291,000
or 21.7% increase was attributable to increased service charges, letter of
credit commissions, wire transfer fees and fees related to loans. The
following tables illustrate the components of non-interest income, as well as
the amount and percentage changes for the periods indicated:
(Dollars in thousands)
Six Months Ended Increase Percent
Non-interest income: 06/30/97 06/30/96 (Decrease) Change
-------- -------- ---------- -------
Securities Gains................. $ 4 $ 22 $ (18) (81.8)
Letter of credit commissions..... 605 603 2 0.3%
Service charges.................. 1,664 1,469 195 13.3
Other operating income........... 747 573 174 30.4
------- ------ ------
Total non-interest income...... $3,020 $2,667 $ 353 13.2%
------- ------ ------
------- ------ ------
2nd Qtr. 2nd Qtr. Increase Percent
Non-interest income: 1997 1996 (Decrease) Change
-------- -------- ---------- ----------
Letter of credit commissions...... $ 396 $ 322 $ 74 23.0%
Service charges................... 848 713 135 18.9
Other operating income............ 386 304 82 27.0
------- ------ ------
Total non-interest income....... $1,630 $1,339 $ 291 21.7%
------- ------ ------
------- ------ ------
NON-INTEREST EXPENSE
Non-interest expense amounted to $15.5 million and $13.6 million,
respectively for the first six months of 1997 and 1996. The increase of $1.9
million or 14.3% in 1997 non-interest expense was primarily due to the higher
operating cost associated with added personnel and facilities from the
acquisition while net other real estate owned ("OREO") expense declined
$863,000. The efficiency ratio, defined as non-interest expense divided by
net interest income before provision for loan losses plus non-interest
income, was 47.08% for the six months ended June 30, 1997 as compared to
55.06% for the same period in 1996.
Quarterly, non-interest expense totaled $7.9 million and $7.0 million for
the second quarter of 1997 and 1996, respectively. The higher quarterly
non-interest expense was attributable to substantially the same factors
discussed in the previous paragraph. The efficiency ratios for the second
quarter of 1997 and 1996 were 46.79% and 55.66%, respectively. The following
tables present the components of the non-interest expense with the amount and
percentage changes for the periods indicated:
10
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<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months Ended Increase Percent
Non-interest expense: 06/30/97 06/30/96 (Decrease) Change
--------- --------- ---------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits................. $ 7,980 $ 6,197 $1,783 28.8%
Occupancy expense.............................. 1,431 1,128 303 26.9
Computer and equipment expense................. 1,152 1,023 129 12.6
Professional services expense.................. 1,578 1,550 28 1.8
FDIC and State assessments..................... 151 183 (32) (17.5)
Marketing expense.............................. 816 586 230 39.3
Net other real estate owned expense............ 446 1,309 (863) (65.9)
Other operating expense........................ 1,975 1,609 366 22.8
------- ------- -------
Total non-interest expense.................. $15,529 $13,585 $1,944 14.3%
------- ------- -------
------- ------- -------
<CAPTION>
2nd Qtr. 2nd Qtr. Increase Percent
Non-interest expense: 1997 1996 (Decrease) Change
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits................. $ 4,029 $ 3,092 $ 937 30.3%
Occupancy expense.............................. 753 575 178 31.0
Computer and equipment expense................. 552 516 36 7.0
Professional services expense.................. 841 837 4 0.5
FDIC and State assessments..................... 96 97 (1) (1.0)
Marketing expense.............................. 405 257 148 57.6
Net other real estate owned expense............ 220 812 (592) (72.9)
Other operating expense........................ 1,005 837 168 20.1
--------- ------- --------
Total non-interest expense................... $ 7,901 $ 7,023 $ 878 12.5%
--------- ------- --------
--------- ------- --------
</TABLE>
FINANCIAL CONDITION
During the six month period from year-end 1996 to June 30, 1997, total
assets increased $27.7 million or 1.8% to $1,532.0 million; loans, net of
deferred fees, grew by $31.9 million or 4.2% to $789.9 million; investment
securities (including available-for-sale and held-to-maturity) decreased $3.8
million or 0.6% to $589.7 million; deposits were up $26.9 million or 2.0% to
$1,391.7 million; and stockholders' equity advanced $7.7 million or 6.5% to
$126.1 million.
EARNING ASSET MIX
Total earning assets amounted to $1,406.6 million as of June 30, 1997, as
compared to $1,379.4 million at year-end 1996, representing an increase of
$27.2 million. Loans, net of deferred fees, accounted for 56.2% of total
earning assets as of June 30, 1997 as compared to 55.0% at year-end 1996,
while securities available-for-sale and securities held-to-maturity together
comprised 41.9% of total earning assets as of June 30, 1997 as compared to
43.0% at year-end 1996. As a result, net interest margin improved 10 basis
points comparing the first six months of 1997 and 1996. The table below
shows the changes in the earning asset mix as of the dates indicated:
(Dollars in thousands)
As of 06/30/97 As of 12/31/96
---------------- ----------------
Types of earning assets: Amount Percent Amount Percent
-------- -------- ------- ---------
Federal funds sold................ $ 27,000 1.9% $ 28,000 2.0%
Securities available-for-sale..... 324,144 23.0 383,391 27.8
Securities held-to-maturity....... 265,595 18.9 210,129 15.2
Loans (net of deferred fees)...... 789,859 56.2 757,913 55.0
---------- ------ ---------- ------
Total earning assets............ $1,406,598 100.0% $1,379,433 100.0%
---------- ------ ---------- ------
---------- ------ ---------- ------
11
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SECURITIES
As of June 30, 1997 securities available-for-sale decreased $59.3 million
or 15.5% to $324.1 million from $383.4 million at year-end 1996, and
securities held-to-maturity increased $55.5 million or 26.4% to $265.6
million from $210.1 million at year-end 1996. The average yields on taxable
securities available-for-sale and held-to-maturity increased from 5.68% and
6.16% to 6.00% and 6.57%, respectively comparing the first six months of 1996
and 1997. The increases helped to widen the net interest margin. The
following tables summarize the composition and maturity distribution of the
investment portfolio as of the dates indicated:
<TABLE>
<CAPTION>
(Dollars in thousands)
SECURITIES AVAILABLE-FOR-SALE: As of 06/30/97
-------------------------------------------------------------
Amortized Gross Gross
Cost Unrealized Gains Unrealized Losses Fair Value
--------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 73,051 $ 92 $ 350 $ 72,793
U.S. government agencies 202,386 139 1,054 201,471
Mortgage-backed securities 20,070 -0- 218 19,852
Assets-backed securities 4,643 6 -0- 4,649
Federal Home Loan Bank stock 5,480 -0- -0- 5,480
Other securities 19,899 -0- -0- 19,899
--------- --------- ------- ----------
Total $ 325,529 $ 237 $1,622 $ 324,144
--------- --------- ------- ----------
--------- --------- ------- ----------
<CAPTION>
As of 12/31/96
-------------------------------------------------------------
Amortized Gross Gross
Cost Unrealized Gains Unrealized Losses Fair Value
--------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 122,116 $ 197 $ 544 $ 121,769
U.S. government agencies 229,695 128 1,446 228,377
State and municipal securities 50 -0- -0- 50
Mortgage-backed securities 23,053 7 178 22,882
Assets-backed securities 4,999 -0- 1 4,998
Federal Home Loan Bank stock 5,315 -0- -0- 5,315
--------- --------- -------- ----------
Total $ 385,228 $ 332 $2,169 $ 383,391
--------- --------- -------- ----------
--------- --------- -------- ----------
<CAPTION>
(Dollars in thousands)
SECURITIES HELD-TO-MATURITY: As of 06/30/97
-------------------------------------------------------------
Carrying Gross Gross Estimated
Value Unrealized Gains Unrealized Losses Fair Value
--------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 26,067 $ 80 $ 7 $ 26,140
U.S. government agencies 59,387 -0- 67 59,320
State and municipal securities 40,229 1,553 11 41,771
Mortgage-backed securities 118,736 352 409 118,679
Assets-backed securities 2,268 -0- 4 2,264
Corporate bonds 8,908 72 -0- 8,980
Other securities 10,000 -0- 2 9,998
--------- --------- -------- ----------
Total $ 265,595 $ 2,057 $ 500 $ 267,152
--------- --------- -------- ----------
--------- --------- -------- ----------
<CAPTION>
As of 12/31/96
-------------------------------------------------------------
Carrying Gross Gross Estimated
Value Unrealized Gains Unrealized Losses Fair Value
--------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 26,081 $ 91 $ 9 $ 26,163
U.S. government agencies 66,900 -0- 106 66,794
State and municipal securities 40,393 1,513 31 41,875
Mortgage-backed securities 63,109 504 103 63,510
Assets-backed securities 3,545 -0- 1 3,544
Other securities 10,101 15 -0- 10,116
--------- ---------- -------- ----------
Total $ 210,129 $ 2,123 $ 250 $ 212,002
--------- ---------- -------- ----------
--------- ---------- -------- ----------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SECURITIES PORTFOLIO MATURITY DISTRIBUTION: (Dollars in thousands)
As of June 30, 1997
Maturity Schedule
-------------------------------------------------------------------
After 1 But After 5 But
SECURITIES AVAILABLE-FOR-SALE: Within 1 Yr Within 5 Yrs Within 10Yrs Over 10Yrs Total
------------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 43,057 $ 29,736 $ -0- $ -0- $ 72,793
U.S. government agencies 5,000 174,478 21,993 -0- 201,471
Mortgage-backed securities* -0- -0- 2,757 17,095 19,852
Assets-backed securities* -0- 4,649 -0- -0- 4,649
Federal Home Loan Bank stock 5,480 -0- -0- -0- 5,480
Other securities 19,899 -0- -0- -0- 19,899
------------- ------------ ------------ ------------ ---------
Total $ 73,436 $ 208,863 $ 24,750 $ 17,095 $ 324,144
------------- ------------ ------------ ------------ ---------
------------- ------------ ------------ ------------ ---------
SECURITIES HELD-TO-MATURITY:
U.S. Treasury securities $ -0- $ 26,067 $ -0- $ -0- $ 26,067
U.S. government agencies -0- 39,387 20,000 -0- 59,387
State and municipal securities 230 10,043 15,355 14,601 40,229
Mortgage-backed securities* -0- 22,050 11,406 85,280 118,736
Assets-backed securities* -0- -0- -0- 2,268 2,268
Corporate bonds -0- 8,908 -0- -0- 8,908
Other securities 10,000 -0- -0- -0- 10,000
------------- ------------ ------------ ------------ ---------
Total $ 10,230 $106,455 $ 46,761 $ 102,149 $ 265,595
------------- ------------ ------------ ------------ ---------
------------- ------------ ------------ ------------ ---------
</TABLE>
* The mortgage-backed securities and asset-backed securities reflect stated
maturities and not anticipated prepayments.
LOANS
The Bank experienced faster loan growth in the first quarter of 1997 than
the second. Total gross loans increased $32.0 million or 4.2% to $793.6 million
as of June 30, 1997, from $761.6 million at year-end 1996. The majority of the
increase came from a $17.7 million growth in real estate mortgage loans, of
which, commercial real estate loans accounted for $14.2 million, residential
real estate loans accounted for $2.1 million and equity line accounted for $1.4
million. Construction loans advanced $4.7 million and the balance of $5.0
million investments in the banker's acceptances were included in the other loan
category. Commercial loans showed an increase of $3.2 million as of June 30,
1997, reversing the previously decreasing trend.
The following table sets forth the classification of loans by type and mix
as of the dates indicated:
(Dollars in thousands)
As of 06/30/97 As of 12/31/96
----------------- -----------------
Types of loans: Amount Percent Amount Percent
-------- ------- -------- -------
Commercial loans $287,087 37.0% $283,894 38.1%
Real estate mortgage loans 437,905 56.5 420,315 56.5
Real estate construction loans 38,248 4.9 33,510 4.5
Installment loans 25,108 3.2 23,551 3.1
Other loans 5,282 0.7 385 0.1
-------- ------- -------- -------
Total loans - Gross 793,630 761,655
Allowance for loan losses (14,026) (1.8) (13,529) (1.8)
Unamortized deferred loan fees (3,771) (0.5) (3,742) (0.5)
-------- ------- -------- -------
Total loans - Net $775,833 100.0% $744,384 100.0%
-------- ------- -------- -------
-------- ------- -------- -------
13
<PAGE>
RISK ELEMENTS OF THE LOAN PORTFOLIO
NON-PERFORMING ASSETS
Non-performing assets include loans past due 90 days or more and still
accruing interest, non-accrual loans, and OREO. Non-performing assets totaled
$28.9 million as of June 30, 1997 as compared to $30.2 million at year-end 1996.
The decrease of $1.3 million in non-performing assets was primarily from a $8.5
million reduction in OREO offset by increases of $4.3 million and $2.9 million
in non-accrual loans and loans past due 90 days or more and still accruing
interest, respectively. The non-accrual coverage ratio, which is the allowance
for loan losses to non-performing loans, was 75.57% at June 30, 1997 as compared
to 119.15% at year-end 1996. The decrease in the non-accrual coverage ratio was
largely due to an increase of $7.2 million in non-performing loans, $4.3 million
of which was attributable to non-accrual loans. The increase in non-accrual
loans was substantially due to two commercial loans totaling $4.7 million, both
of which were secured by the first trust deeds on the respective commercial
properties. The following table presents the breakdown of non-performing assets
by categories as of the dates indicated:
(Dollars in thousands)
As of As of As of As of
Non-Performing Assets: 06/30/97 03/31/97 12/31/96 09/30/96
-------- -------- -------- --------
Loans past due 90 days or more and
still accruing interest $ 4,943 $ 56 $ 2,050 $ 2,272
Non-accrual loans 13,618 10,120 9,305 12,928
-------- -------- -------- --------
Total past due loans 18,561 10,176 11,355 15,200
Real estate acquired in foreclosure 10,390 14,202 18,854 15,570
-------- -------- -------- --------
Total non-performing assets $28,951 $24,378 $30,209 $30,770
-------- -------- -------- --------
-------- -------- -------- --------
Accruing troubled debt restructurings 3,673 3,195 3,201 2,737
Non-performing assets as a percentage
of period-end total loans plus OREO 3.60% 3.01% 3.87% 5.12%
The balance of $13.6 million in non-accrual loans as of June 30, 1997
consisted mainly of $9.3 million in commercial loans and $3.7 million in
commercial real estate loans. The following tables present the type of
properties securing the loans and the type of businesses the borrowers engaged
in under commercial real estate and commercial non-accrual loan categories as of
the dates indicated:
(Dollars in thousands)
06/30/97 12/31/96
------------------------ -------------------------
Non-accrual Loan Balance
---------------------------------------------------
Commercial Commercial
Type of property: Real Estate Commercial Real Estate Commercial
----------- ---------- ----------- ----------
Single/multi-family residence $ 848 $ 774 $ 583 $ 1,707
Commercial 1,121 7,820 226 3,302
Motel 1,350 489 1,350 511
Marina -0- -0- 769 -0-
Others 365 150 -0- 399
Unsecured -0- 101 -0- 84
----------- ---------- ----------- ----------
$ 3,684 $ 9,334 $ 2,928 $ 6,003
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Type of business:
Real estate development $ -0- $ 501 $ 995 $ 562
Wholesale -0- 1,622 -0- 780
Restaurant -0- -0- -0- -0-
Import -0- 18 -0- 305
Motel 1,899 489 1,933 511
Others 1,785 6,704 -0- 3,845
----------- ---------- ----------- ----------
$ 3,684 $ 9,334 $ 2,928 $ 6,003
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
14
<PAGE>
The previous tables show a $1.4 million balance in non-accrual motel loan
as of June 30, 1997, which represents one credit secured by the first trust
deed on the respective motel located in Southern California. The $1.1
million non-accrual loans under commercial real estate included three credits
secured by the first trust deeds of the respective commercial properties.
Under the non-accrual commercial loan category as of June 30, 1997, the $7.8
million balance consisted of 12 credits including the two credits totaling
$4.7 million mentioned previously plus 10 others with a majority of the loan
amounts less than $300,000. The collateral on these credits include
primarily first trust deeds and secondarily second and third trust deeds on
commercial buildings and warehouses.
Troubled debt restructurings totaled $3.7 million as of June 30, 1997, as
compared to $3.2 million at year-end 1996. All of the restructured loans were
current under their revised terms with the exception of one credit in the amount
of $473,000 which was 10 days past due as of June 30, 1997.
There were no loan concentrations to multiple borrowers in similar
activities, which exceeded 10% of total loans as of June 30, 1997.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses amounted to $14.0 million or 1.77% of total
loans as of June 30, 1997, as compared to $13.5 million or 1.78% of total loans
at year-end 1996. The following table presents information relating to the
allowance for loan losses for the periods indicated:
(Dollars in thousands)
YTD YTD YTD YTD
Allowance for loan losses: 06/30/97 03/31/97 12/31/96 09/30/96
-------- -------- -------- --------
Balance at beginning of period $13,529 $13,529 $12,742 $12,742
Allowance from acquisition -0- -0- 1,644 -0-
Provision for loan losses 1,800 900 3,600 2,700
Loans charged-off (1,346) (39) (5,388) (3,867)
Recoveries of charged-off loans 43 24 931 620
-------- -------- -------- --------
Balance at end of period $14,026 $14,414 $13,529 $12,195
-------- -------- -------- --------
-------- -------- -------- --------
Average loans outstanding during the
period $770,763 $754,240 $579,634 $555,382
Ratio of net charge-offs to average
loans outstanding during the period
(annualized) 0.34% 0.01% 0.77% 0.78%
Provision for loan losses to average
loans outstanding during the period
(annualized) 0.47% 0.48% 0.62% 0.65%
Allowance to non-performing loans at
period-end 75.57% 141.65% 119.15% 80.23%
Allowance to total loans at period-end 1.77% 1.81% 1.78% 2.08%
In determing the allowance for loan losses, management continues to assess
the risks inherent in the loan portfolio, the possible impact of known and
potential problem loans, and other factors such as collateral value, portfolio
composition, loan concentration, financial strength of borrower, and trends in
local economic conditions.
The Bank's allowance for loan losses consists of a specific allowance and a
general allowance. The specific allowance is further broken down to provide for
impaired loans and the remaining internally classified loans. Management
allocates a specific allowance to those remaining internally classified loans
which do not require impairment allowance, based on the current financial
condition of the borrowers and guarantors, the prevailing value of the
underlying collateral and general economic conditions. The general allowance is
determined by an assessment of the overall quality of the unclassified portion
of the loan portfolio as a whole, and by loan type. Management maintained the
percentage assigned to the general allowance based on charge-off history and
management's knowledge
15
<PAGE>
of the quality of the portfolio. The following table presents a breakdown of
impaired loans and the impairment allowance related to impaired loans:
(Dollars in thousands)
As of June 30, 1997
-----------------------
Impaired loans: Recorded Impairment
Loans with impairment allowance: Investment Allowance
---------- ----------
Commercial $10,830 $ 1,713
Commercial real estate 14,683 2,296
Other 93 57
---------- ----------
Total loans with impairment allowance $25,606 $ 4,066
---------- ----------
---------- ----------
Based on the above analysis, management believes the allowance level as of
June 30, 1997 to be adequate to absorb the estimated known and inherent risks
identified through its analysis.
OTHER REAL ESTATE OWNED
The Company's OREO properties, net of a valuation allowance of $1.3
million, were carried at $10.4 million as of June 30, 1997. This compares with
OREO, net of a valuation allowance of $1.6 million, carried at $18.8 million at
year-end 1996. During the first six months of 1997, nine properties totaling
$10.5 million were disposed of with a net loss of $49,000. The Bank made three
loans totaling $6.6 million to facilitate sales of three OREO properties in the
first six months of 1997 at market terms. As of June 30, 1997, the Bank's OREO
properties include different types of residential properties, commercial
buildings, warehouses and land. All properties are located in Southern
California.
The Bank maintains a valuation allowance for the OREO properties in order
to record estimated fair value of these properties. Periodic evaluation is
performed on each property and corresponding adjustment is made to the valuation
allowance. Any decline in value is recognized as non-interest expense in the
current period. During the first six months of 1997, management provided
approximately $275,000 to the provision for OREO losses based on new listing
prices or new appraisals received.
DEPOSITS
Total deposits increased $26.9 million or 2.0% to $1,391.7 million as of
June 30, 1997, as compared to $1,364.7 million at year-end 1996. Time deposits
over $100,000 ("Jumbo CD's") continued to account for the majority of the
increase while core deposits (defined as total deposits excluding brokered
deposits and Jumbo CD's) advanced slightly. The ratio of core deposits to total
deposits declined barely from 64.22% at year-end 1996 to 63.28% at June 30,
1997.
Management continues to monitor the Jumbo CD portfolio to identify any
changes in the deposit behavior in the market and of the patrons the Bank is
servicing. The Bank's Jumbo CD's are considered generally less volatile since
1) a majority of the Bank's Jumbo CD's have been fairly consistent based on
statistics which support that a considerable portion of the Jumbo CD's stayed
with the Bank for more than two years; 2) the Jumbo CD portfolio continued to be
diversified with 3,188 individual accounts owned by 2,296 individual depositors
as of May 30, 1997. The balance of the accounts averaged approximately
$155,000; and 3) this phenomenon of having relatively higher percentage of Jumbo
CD's exists in most of the Asian American banks in the Company's market which is
dictated by the fact that the customers in this market tend to have a higher
savings rate. However, management has constantly made efforts to discourage the
continued growth in Jumbo CD's, such as to diversify the customer base by branch
expansion and acquisition, to offer non-competitive interest rates paid on Jumbo
CD's and to develop new transaction-based products to attract depositors. There
were no brokered deposits as of June 30, 1997. The following table illustrates
the deposit mix on the dates indicated:
16
<PAGE>
(Dollars in thousands)
As of 06/30/97 As of 12/31/96
--------------------- ---------------------
Types of deposits: Amount Percent Amount Percent
---------- ------- ---------- -------
Demand $ 148,518 10.7% $ 135,345 9.9%
NOW accounts 116,000 8.3 118,498 8.7
Money market accounts 94,849 6.8 95,158 7.0
Savings deposits 220,896 15.9 224,443 16.4
Time deposits under $100,000 300,320 21.6 302,981 22.2
Time deposits of $100,000 or more 511,091 36.7 488,315 35.8
---------- ------- ---------- -------
Total deposits $1,391,674 100.0% $1,364,740 100.0%
---------- ------- ---------- -------
---------- ------- ---------- -------
CAPITAL RESOURCES
Stockholders' equity amounted to $126.1 million or 8.23% of total assets as
of June 30, 1997, as compared to $118.4 million or 7.87% of total assets at
year-end 1996. The $7.7 million increase in stockholders' equity was primarily
attributable to year-to-date net income of $9.4 million, $709,000 from issuance
of additional common shares through Dividend Reinvestment Plan and a decrease of
$256,000 in the unrealized holding losses on securities available-for-sale, net
of tax, offset by dividends paid in the amount of $2.7 million.
The Company declared a cash dividend of $0.15 per share in January, April
and July, 1997, on 8,878,144, 8,895,878 and 8,914,260 shares outstanding,
respectively. Total cash dividends paid in 1997, including the $1.3 million
paid in July 1997, amounted to $4.0 million.
Management is committed to retain the Company's capital at a level
sufficient to support future growth, to protect depositors, to absorb any
unanticipated losses and to comply with various regulatory requirements.
As presented in the following tables, the Company and the Bank's capital
and leverage ratios well exceeded the regulatory minimum requirements as of June
30, 1997. The capital ratios of the Bank place it in the "well capitalized"
category which is defined as institutions with total risk-based ratio equal to
or greater than 10.0%, Tier 1 risk-based capital ratio equal to or greater than
6.0% and Tier 1 leverage capital ratio equal to or greater than 5.0%.
<TABLE>
<CAPTION>
(Dollars in thousands)
Company Bank
As of 06/30/1997 As of 06/30/1997
--------------------- ---------------------
Balance Percent Balance Percent
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Tier 1 capital (to risk-weighted assets) $ 117,155* 12.25% $ 114,306* 11.95%
Tier 1 capital minimum requirement 38,270 4.00 38,270 4.00
---------- ------- ---------- -------
Excess $ 78,885 8.25% $ 76,036 7.95%
---------- ------- ---------- -------
---------- ------- ---------- -------
Total capital (to risk-weighted assets) $ 129,140* 13.50% $ 126,291* 13.20%
Total capital minimum requirement 76,540 8.00 76,540 8.00
---------- ------- ---------- -------
Excess $ 52,600 5.50% $ 49,751 5.20%
---------- ------- ---------- -------
---------- ------- ---------- -------
Risk-weighted assets $ 956,755 $ 956,750
Tier 1 capital (to average assets)
- Leverage ratio $ 117,155* 7.75% $ 114,306* 7.56%
Minimum leverage requirement 60,469 4.00 60,469 4.00
---------- ------- ---------- -------
Excess $ 56,686 3.75% $ 53,837 3.56%
---------- ------- ---------- -------
---------- ------- ---------- -------
Total average assets $1,511,726 $1,511,721
</TABLE>
* Excluding the unrealized holding losses on securities available-for-sale of
$803,000, and goodwill of $9,791,000.
17
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is the Company's ability to maintain sufficient cash flow to
meet maturing financial obligations and customer credit needs. The Company
derives liquidity primarily from various types of deposits. In addition,
liquidity can be obtained from assets as well, which include cash and cash
equivalents, time deposits with other depository institutions, Federal funds
sold and repurchases, unpledged securities available-for-sale, and unpledged
securities held-to-maturity. The Company's liquidity ratio (defined as net
cash, short-term and marketable securities to net deposits and short-term
liabilities) stood at 47.12% as of June 30, 1997, which was slightly higher
than 47.09% at year-end 1996.
To further enhance its liquidity, the Bank maintains a total credit line
of $45 million for Federal funds with three correspondent banks, and a total
retail certificate of deposit (CD) line of approximately $210 million with
three brokerage firms. Moreover, the Bank is a shareholder of Federal Home
Loan Bank (FHLB) since January 1993, which enables the Bank to have access to
lower cost FHLB financing when and if necessary. Management believes all the
above-mentioned sources will provide adequate liquidity to the Company to
meet its daily operating needs.
Interest sensitivity risk management minimizes the risk to net interest
income resulting from the changes in market interest rates. The Bank's
Investment Committee monitors interest sensitivity risk on an on-going basis
by using, among other things, simulation model, gap analysis and certain key
ratios. Gap analysis is a measure to identify the differences between rate
sensitive assets and rate sensitive liabilities over certain periods of time.
A positive gap exists when rate sensitive assets exceed rate sensitive
liabilities and a negative gap exists when rate sensitive liabilities exceed
rate sensitive assets. Generally, a positive gap would enhance net interest
margin during periods of increasing interest rates and vice versa, and a
negative gap would impair net interest margin during periods of increasing
interest rates and vice versa. As of June 30, 1997, the Company's rate
sensitive liabilities exceeded rate sensitive assets by roughly $190.6
million with a cumulative gap ratio of a negative 12.44% within a 1-year
period.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, including its wholly-owned subsidiary, Cathay Bank, has been a
party to ordinary routine litigation incidental to various aspects of its
operations.
Management is not currently aware of any other litigation that will have
material adverse impact on the Company's consolidated financial condition, or
the results of operations.
ITEM 2. CHANGES IN SECURITIES
There have been no changes in securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of stockholders was held on April 21, 1997.
At the 1997 Annual Meeting, the following directors (Class I) were elected to
serve until 2000:
Michael M.Y. Chang
Patrick S.D. Lee
Anthony M. Tang
Thomas G. Tartaglia
The number of votes cast for or withheld, with respect to the election of each
Class I Director was as follows:
For Withheld
--------- --------
Michael M.Y. Chang 5,686,954 55,657
Patrick S.D. Lee 5,686,940 55,670
Anthony M. Tang 5,687,580 55,031
Thomas G. Tartaglia 5,687,580 55,031
Other directors whose terms of office continued after the meeting:
Term Ending in 1998 (Class II) Term Ending in 1999 (Class III)
------------------------------ -------------------------------
Ralph Roy Buon-Cristiani George T.M. Ching
Kelly L. Chan Wing K. Fat
Dunson K. Cheng Wilbur K. Woo
Chi-Hung Joseph Poon
ITEM 5. OTHER INFORMATION
There were no reportable events.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reportable events.
Exhibit:
27 Financial Data Schedule
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cathay Bancorp, Inc.
--------------------------
(Registrant)
Date: August 13, 1997 DUNSON K. CHENG
----------------- --------------------------
Dunson K. Cheng
Chairman and President
Date: August 13, 1997 ANTHONY M. TANG
----------------- --------------------------
Anthony M. Tang
Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 56,011
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 324,144
<INVESTMENTS-CARRYING> 265,595
<INVESTMENTS-MARKET> 267,152
<LOANS> 789,859
<ALLOWANCE> 14,026
<TOTAL-ASSETS> 1,532,005
<DEPOSITS> 1,391,674
<SHORT-TERM> 2,922
<LIABILITIES-OTHER> 11,266
<LONG-TERM> 0
0
0
<COMMON> 89
<OTHER-SE> 126,054
<TOTAL-LIABILITIES-AND-EQUITY> 1,532,005
<INTEREST-LOAN> 35,894
<INTEREST-INVEST> 17,613
<INTEREST-OTHER> 809
<INTEREST-TOTAL> 54,316
<INTEREST-DEPOSIT> 24,287
<INTEREST-EXPENSE> 24,350
<INTEREST-INCOME-NET> 29,966
<LOAN-LOSSES> 1,800
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 15,529
<INCOME-PRETAX> 15,657
<INCOME-PRE-EXTRAORDINARY> 15,657
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,398
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 4.48
<LOANS-NON> 13,618
<LOANS-PAST> 4,943
<LOANS-TROUBLED> 3,673
<LOANS-PROBLEM> 12,864
<ALLOWANCE-OPEN> 13,529
<CHARGE-OFFS> 1,346
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 14,026
<ALLOWANCE-DOMESTIC> 14,026
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
